Auto-enrolment master trusts will have to meet new funding and governance standards under a pensions bill released today (20 October) by the Department for Work and Pensions.
In a statement, DWP introduced a number of criteria which these AE pension providers would need to meet under the Pension Schemes Bill.
The first two were that "persons involved in the scheme are fit and proper", and that "the scheme is financially sustainable".
DWP said the bill would create "a new approval regime for master trusts" and give "new powers to The Pensions Regulator to intervene where schemes are at risk of failing".
In addition to the governance and capital adequacy standards, the draft legislation also required that the "scheme funder meets certain requirements in order to provide assurance about their financial situation".
It also required that "systems and processes requirements, relating to the governance and administration of the scheme are sufficient"; and that "the scheme has an adequate continuity strategy".
Commenting on the bill, pensions minister Richard Harrington said: "We are helping to create a culture of saving across the country and have delivered much needed change to our pension system to make saving easier, fairer and safer for all.
"We want to make sure that people saving into master trusts enjoy the same protection as everyone else, which is why we are levelling-up that protection, to give these savers more confidence in their pension schemes."
Lesley Titcomb, chief executive of the The Pensions Regulator, welcomed the bill, saying: "We are very pleased that the Pension Scheme Bill will drive up standards and give us tough new supervisory powers to authorise and de-authorise master trusts according to strict criteria, ensuring members are better protected and ultimately receive the benefits they expect."
Morten Nilsson, chief executive of AE provider NOW: Pensions, said the bill was a "long time coming".
“When we entered the market we were shocked at how easy it was to set up a master trust. It was simply a case of sending a form off to HMRC and The Pensions Regulator, nothing more."
He added, however, that that capital requirements were not strict enough.
Daren O'Brien, independent financial adviser and employee benefits specialist with Aurora Financial Solutions, welcomed the bill, saying: "It will help with the due diligence if master trusts are well-regulated."
He added, however, that if it caused some master trusts to close down, it could create extra work for business advisers.
james.fernyhough@ft.com
