Defined Contribution  

Nest receives master trust authorisation

Nest receives master trust authorisation

The government-backed workplace pension scheme National Employment Savings Trust has been authorised by The Pensions Regulator, bringing the total number of master trusts authorised under the new regime to 27.

The watchdog announced today (September 10) that besides Nest - with more than 8m members and £7.5bn in assets under management - Aegon Master Trust, Creative Pension Trust, Ensign Retirement Plan and the Baptist Pension Scheme also received authorisation.

Otto Thoresen, Nest’s chairman, said the scheme was glad to have achieved the milestone, as “the master trust authorisation regime is key to ensuring high standards of governance and control across this part of the pensions landscape”.

He added: “With many workers saving for the first time through auto-enrolment it’s right to build confidence among pension savers. We’ll continue to work hard at achieving good outcomes for our 8m members.”

Aegon Master Trust, which was acquired by the provider from BlackRock, has currently more than 100,000 members and £1.5bn in assets under management.

Kate Smith, head of master trust at Aegon UK, noted that higher standards among master trusts meant greater protection for its members, which was something she had been calling for over many years.

She said: “As supervision starts to kick in master trust standards will have to continue to be maintained to retain authorisation.

“This improved regulation and governance means employers and members, combined with a competitive market can feel reassured that they will be supported to achieve good member outcomes through engaging solutions to help people save for the future.”

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.

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, according to the watchdog.

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 fulfil their auto-enrolment obligations in recent years.

maria.espadinha@ft.com

What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.