The number of master trusts that won’t apply for formal authorisation and will leave the market has risen to 24, equating to more than a quarter of those currently in the market.
Fgures published by the pension watchdog today (5 September) show four additional master trusts have decided not to apply for authorisation, which opens on 1 October.
FTAdviser reported in July that 20 workplace pension schemes had informed The Pensions Regulator (TPR) of their intention of winding up.
Under the new registration process, master trusts will have to hold enough capital to cover the cost of a worst-case scenario, such as the cost of transferring to another scheme or of winding up, without charging members.
The government and the regulator have been formulating these new rules since 2016, which are expected to drive consolidation in the market.
Schemes will have six months to apply to TPR to continue to operate in the market.
From the current 89 schemes in the market, 40 to 45 are expected to submit a formal application in October.
Some 33 schemes have submitted voluntary applications for the new registration regime, and have now received feedback from TPR on their submissions, the regulator said.
In a report about the main lessons learned from these draft applications, also published today, TPR advised schemes not to rush their submission, highlighting that the providers will have six months to do so.
"Apply when you’re satisfied that you can demonstrate you meet the authorisation criteria – rather than as soon as the window opens," it said.
Master trusts should also make sure all evidence is provided, including certain documents which are required by law, and is clearly signposted, TPR stated.
Schemes are advised to follow the regulator’s code and guidance to explain how they meet the authorisation criteria. If alternative ways are chosen, providers must set out the necessary explanations and evidence in their applications, it added.
Applicants will need to clearly explain how the master trust operates, and give evidence which demonstrates this working in practice, the regulator said.
Finally, TPR said it expected scheme trustees to make the application for authorisation themselves with evidence of an emphasis on the interests of members.
Some of the draft applications were more focused on the commercial perspective of the scheme and the interests of the scheme funder, it warned.
maria.espadinha@ft.com
