Over a quarter of master trusts question TPR’s supervisory approach

Written by Theo Andrew
5/12/18

Just over one quarter of the 15 biggest master trusts have questioned The Pensions Regulator’s approach to supervision, a new report from the Pensions Management Institute (PMI) has found.

According to its master trust report launched today, 5 December, 27 per cent said they would prefer a more principle-based approach, over the regulator's current prescriptive-based approach, due to "inadvertent outcomes" such as eliminating good providers and short-termism.

Despite this, the PMI, which launched the report along with a working party of eight companies, found that 73 per cent of providers questioned were content with the TPR’s detailed approach.

Commenting on some of the issues around supervision, one provider said: “Some of the prescriptive detail which master trusts could fail on does have a significant immediate impact on the sustainability and quality of the scheme. By being overly prescriptive TPR could eliminate some good master trusts for no good reason.”

TPR said they are confident their approach will “ensure sustainability and reduce risk”.

A TPR spokesperson said: "Our research shows the industry wants us to be clearer, quicker and tougher and, through our guidance and communications, we are being clearer with schemes about what we expect to see in a well governed scheme.

"The purpose of master trust authorisation is to drive up standards to ensure better outcomes for members. We consulted on our supervision policy earlier this year and updated it in response to industry feedback. Supervision will help ensure that master trusts continue to meet the tough new standards outlined in legislation."

Furthermore, 100 per cent felt that authorisation was a “good thing”, while 87 per cent felt the process would lead to further consolidation and collaboration.

The research also highlighted that 60 per cent of respondents felt there would be no more than 20 master trusts in five years, with 20 per cent saying the number will be between 25-30.

According to the regulator’s latest monthly figures, 33 master trusts are now expected to exit the market, up from 30 master trusts at the end of October, while three schemes have already completed their exit. Just one master trust, Lifesight, applied for authorisation over October.

PMI president, Lesley Carline, said: “Our report has shown that the growing master trust sector must overcome significant obstacles if it wants to offer good service delivery for members. However, the figures also indicate that much of the industry, including some major players in the master trust sector, are largely aligned and eager to work together to help tackle industry issues.”

The report found that 53 per cent supported industry-wide collaborative technology such as the pensions dashboard, while 73 per cent found that current systems limited their approach.

Problems were also raised around the skill set of trustees, with 27 per cent of respondents believing that trustees do not possess the right balance of commercial and DC experience to run a master trust, with 73 per cent saying there is a shortage of DC skills at TPR.

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