Master trusts can start submitting voluntary applications for the new registration regime as soon as May, The Pensions Regulator announced.
However, these will not be binding, as the workplace pension providers will have to submit a formal application when the window for registration opens later in the year, the watchdog warned.
A master trust is a multi-employer occupational scheme where each employer has its own division within the master arrangement. They have become a popular solution for employers seeking to fulfill their auto-enrolment obligations.
However after something of a free-for-all where master trusts could be set up with limited regulations governing them, the government has stepped in to tighten up the process.
Schemes will need to be registered, with the legislation expected to come into force in October 2018.
Under the new rules, master trusts will have to hold enough capital to cover costs in the worst-case scenario, such as costs of transferring to another scheme or of winding up, without charging members.
The government and the regulator have been discussing these new rules since 2016, which are expected to drive consolidation in the market.
The Department for Work & Pensions (DWP) published this week its response to the new rules consultation, where it announced a registration fee cut for existing master trusts by more than a third, after several providers questioned its calculation method.
Kim Brown, recently appointed head of master trust authorisation and supervision at the regulator, said that The Pensions Regulator will publish its draft code on the new rules, which will explain in detail what type of information providers will need to supply to the watchdog.
A guidance document will also be published during the consultation period of the new code, she added.
She said: “Our code and guidance will provide clarity on some commonly asked questions, including how to identify the people who hold key roles, like strategists, and guidance on how to produce the business plan.”
To help these schemes prepare for the new authorisation regime, The Pensions Regulator is encouraging master trusts to apply for a readiness review by submitting a voluntary draft application, which will open in May for a six-week period.
Ms Brown said that the regulator will aim to give feedback by 31 August on the quality of their evidence and any areas that need to be improved.
She said: “It will not be an indication about the likely success of an application – that will be a decision made by the determinations panel on authorisation applications.
“Readiness reviews will provide applicants with clarity about the quality of evidence needed for authorisation so they are better prepared to submit an application when the formal window opens from October.”
For Kate Smith, head of pensions at Aegon, The Pensions Regulator’s master trust code "is the missing jigsaw piece and is eagerly awaited by both master trust providers and their trustees".
She said: “It will set out the regulator’s expectations of what exactly is expected to become an authorised master trust, filling in some of the gaps.
“The authorisation process is new to the regulator and to providers and trustees, so the readiness review or ‘dummy run’ will be an important part of the process."
Ms Smith argued, however, that the six-week period to submit this voluntary application “is an extremely quick turnaround time for master trusts to prepare their draft applications," considering they will only just have received all the requirements.
She said: "But I expect that most master trusts will use this opportunity to submit draft applications so they can get feedback from the regulator. This will put them in a stronger position once they do the real thing from October.”
Ms Brown said: “In September we plan to share general lessons that have been learnt across the market from these draft applications, to support every master trust in their application for authorisation and to ensure this important new legislation delivers the safe and sustainable master trusts market we need.”
The Pensions Regulator is expected to complete its assessment of these schemes by October 2019.
maria.espadinha@ft.com
