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United Kingdom : Master trust pension schemes consultation.

An authorisation and supervision regime will ensure that tough new powers are in place to protect the 7 million members of master trust schemes, who have a combined 10 billion worth of assets invested. The changes will provide them with equivalent protection to members in other types of pension schemes.

Master trust schemes will be assessed against 5 key tests:

persons involved in the master trust scheme are fit and proper

that the scheme is financially sustainable

that each scheme funder meets specific requirements in order to provide assurance about their financial situation (including through presenting a business strategy and full, audited accounts)

the administrative and governance systems/processes used in running the scheme are sufficient

the scheme has an adequate continuity strategy

Under these plans, consumer savings will be more secure with master trusts being required to meet strict criteria on all aspects of operations and governance.

Guy Opperman, Minister for Pensions and Financial Inclusion, said: The majority of master trust pension schemes are operating well, but for too long these schemes have been subject to far less regulatory scrutiny than new contract-based providers.

Nobodys savings should be less secure simply because of the pension chosen by their employer. That is why the new authorisation and supervision regime is a significant step forward in bringing master trust and other occupational schemes into line.

These strict new tests will ensure current and future master trusts are strong, safe and well placed for consumers and employers to invest their pension contributions.

The new regime will be administered by The Pensions Regulator. Under the new regime all current and prospective master trust schemes will need to apply for authorisation to operate in the market. The regulator will also have greater ongoing powers to work with, and if necessary, de-authorise master trusts where they are at risk of failing.

Master trusts will also have to demonstrate on an ongoing basis that they continue to meet the strict authorisation criteria, including demonstrating provisions to ensure member funds are protected in the event of a scheme needing to be wound up.

The master trust market has grown rapidly since 2012. There are currently 87 master trusts, which now represent 90% of savers who have been automatically enrolled into a workplace pension.

The announcement follows the passing of the Pension Scheme Act in April 2017, which introduced this regime proposal. It is expected that the new regulations will come into effect from October 2018.

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Publication:Mena Report
Date:Dec 2, 2017
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