HMRC to update tax regime for master trusts

HMRC to update tax regime for master trusts

The government will update the tax regime for pension providers using the master trust model, bringing it in line with The Pensions Regulator's strict new rules for the sector.

The announcement, which appeared in the Spring Budget papers, did not clarify exactly what the new regime would look like.

However, it will likely be stricter than HM Revenue & Customs' current registration regime for master trusts, which has been criticised for being too easy to complete.

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The Budget papers stated today (8 March): "The government will amend the tax registration process for master trust pension schemes to align with The Pensions Regulator’s new authorisation and supervision regime.

"This will help to boost consumer protection and improve compliance."

The master trust structure, which allows multiple employers to enroll their employees into the scheme, has taken off since the introduction of auto-enrolment in 2012, with up to 100 new providers entering the market.

However, until last year the sector had been subject to very light regulation.

Pressure from a number of quarters - most notably the work and pensions select committee - saw the Department for Work & Pensions introduce legislation requiring master trusts to meet capital adequacy and governance requirements late last year.

Today's (8 March) announcement sees the tax regime brought in line with this legislation.

Darren Philp, director of policy and market engagement at auto-enrolment master trust The People’s Pension, welcomed the move. 

"Anything which helps protect consumers is good news, and the move makes total sense," he said. 

"Perhaps HMRC should look to tighten the pensions tax registration process more widely to protect savers and make it more difficult for scammers to operate, as safeguards here are still seriously lacking?”

Paul Darlow, head of proposition development at pension consultancy Xafinity, said it was "good to see" the government was updating the tax regime.

“It is in everyone’s interests that only well run, bona fide pension schemes be established – anything that can be done to further that aim should be welcomed. It will help to boost consumer confidence and protection, which can only be a good thing," he said.