Welplan has become the latest provider to announce it will exit the master trust market, affecting up to 55,000 members.
The decision came in direct response to the Pensions Regulator’s new authorisation regime, which Welplan stated was too expensive for many small and medium-sized trusts to pursue.
Welplan is now seeking a provider for the scheme’s 1,900 participating employers and 55,000 individual members. The scheme has been shut to new participating employers since March 11.
However, the company has plans to continue as an employee-benefits brand.
Last week, FTAdviser reported TPR had granted a number of extensions for master trust applications following a late surge in requests.
With just a few days remaining before the application deadline, TPR has granted 11 extensions on applications totalling 22 as of March 21.
About 40 master trusts have until the end of March to apply for authorisation with TPR or else exit the market. These are the master trusts that are left from an initial group of 90 players.
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 their members to another scheme or of winding up, without charging members.
Bruce Kirton, chief executive of Welplan Pensions, said over the last six months it had become clear the master trust regulatory environment favoured larger businesses and there was "no meaningful place" for a small or medium-sized specialist provider such as Welplan Pensions.
He said: "This has been a very difficult decision. We’ve been around since 1960 and have operated a multi-employer DC scheme since 1988.
"We’ve always been and will remain committed to offering the best possible service and value to our employers and their members in both pensions and employee benefits."
Scott Gallacher, director at Rowley Turton Private Wealth Management, said whilst it was unfortunate that individual members will be inconvenienced by Welplan’s exit, he supports TPR’s authorisation regime.
He said: "Master trust regulation has been needed for quite some time. Did we really need the 90 providers that were originally in the market?
"I think many of the smaller providers would have been weeded out in the end anyway. We have stuck with the larger providers for this very reason. You need a larger player to succeed in the area."
Sharon Bellingham, senior consultant at Hymans Robertson, added: "This isn’t unexpected. The smaller providers will struggle with meeting the costs of the authorisation.
"However, it is important to remember the regulator will be monitoring how Welplan exits the market to ensure scheme members are supported and protected."