Regulation  

How master trusts are regulated

  • Describe some of the bases on which master trusts will be assessed
  • Describe what happens to a master trust if it does not get authorisation
  • Identify what is needed to demonstrate financial competence
CPD
Approx.30min

One aspect of the new authorisation process is to make the Master Trust Assurance Framework (MTAF) redundant. As such, Defaqto Engage users will see reference to it disappear from our database in early 2020.

What is involved in being authorised?

Full details can be found in TPR Code of Practice, code 15: Authorisation and supervision of MTs. 

In essence, the code sets out the fit and proper assessments that schemes and the key people fulfilling certain roles must pass. 

TPR has identified three critical roles.  Collectively individuals within these roles have the responsibility for ensuring members’ interests are protected and that the day-to-day running of the MT is planned, resourced, and adequately funded.

This is irrespective of whether they do it as individuals, a group of individuals and/or individuals working on behalf of a corporate entity. 

Where a role or part of the role is fulfilled by a corporate entity, TPR also wish to assess the appropriate senior individuals.

Additionally, there are two discretionary categories where TPR can choose to assess those fulfilling roles for fitness and propriety. 

These roles are considered discretionary as the influence and/or financial incentive differs between relationships and schemes. The roles are:

Each role has a different assessment criteria and therefore where an individual carries out more than one of the roles they must be assessed separately for each.

The authorisation criteria can be split into five assessments:

  1. Fit and proper
  2. Systems and processes
  3. Continuity strategy
  4. Scheme funder
  5. Financial sustainability

Each of the five assessments is designed to make sure the members' interests are protected in the event of a triggering event (See below).

We summarise each of the five assessment below. However, before we do it is important to understand what a triggering event is.

Triggering events

This is an event that could cause a MT to struggle to maintain its ongoing compliance and the provision of its statutory duties, including:

  • Maintaining up-to-date member records
  • Handling investments
  • Recovering outstanding contributions
  • Continuing to pay benefits for members already in retirement
  • Maintaining administration of the scheme
  • Retaining access to service providers (audit, accounting, investment, legal, etc.)

All triggering events need to be identified and a formal resolution plan put in place should they occur.  Importantly, if they do occur they must now be reported to TPR. 

Fit and proper

All individuals being assessed must satisfy to TPR that they are fit and proper. This is done by evidencing that they meet the standards for:

  • Honesty, integrity and financial soundness
  • Competency (knowledge) and conduct

A declaration of financial strength, enforcement actions and criminal convictions will be required for each individual.

For trustees and strategists, TPR requires evidence of competence

Items such as statements of development, evidence of qualifications or learning programmes and other relevant experience.

Systems and processes

MTs must have sufficient IT systems and processes in place to run efficiently. 

In addition, they must have robust systems and processes to effectively govern the scheme and comply with all the relevant requirements.

MTs must confirm that their IT systems can provide a minimum functional capability, and be able to demonstrate it.