Some 39 master trusts applied for authorisation with The Pensions Regulator, as the application process for the workplace pension schemes has ended.
From these, six master trusts have been approved - BlueSky Pension Scheme, the Crystal Trust, Legal & General WorkSave Mastertrust, Legal & General WorkSave Mastertrust (RAS), LifeSight, and the Universities Superannuation Scheme – while the remaining 33 are waiting for regulatory approval.
TPR also received an application for a new master trust after the authorisation window closed on March 31, it stated in its latest master trust newsletter, published today (June 5). However, it did not disclose any further details about this application.
Under the new registration process, master trusts 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.
New master trusts can apply to enter the market at any time. Nevertheless, new schemes will be more intensely supervised than existing schemes because they will not have an operational track record, the watchdog noted.
The government and the regulator have been discussing the new master trust rules since 2016 and were expecting them to drive consolidation in the market.
The change in legislation has prompted more than half of the 81 master trusts operating in the market in January 2018 to leave, partly because they realised their business could no longer be classed as a master trust, while some others entered.
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 in recent years.
From October 1, 2018, master trusts had until March 31, 2019 to apply to the TPR for authorisation to demonstrate that they have met required standards.
As of May 31, 10 schemes have exited the market, and 35 other master trusts decided to close and are in the process of transferring their members to an alternative master trust scheme or other appropriate vehicle.
According to Mark Futcher, partner and head of defined contribution at Barnett Waddingham, the authorisation process will increase the quality of the master trusts on the market, but there will be some who don’t quite hit the mark.
He said: "With a number of masters trusts out there with historic errors it will be interesting to see how many of the 39 are actually authorised.
"The upcoming months will see the successful master trusts separate themselves from the unsuccessful as they ensure members are protected and benefit from better outcomes."
maria.espadinha@ft.com
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