The Pensions Regulator (TPR) has today announced that it plans to develop in conjunction with industry, a regulatory framework which addresses the “inherent complexities” surrounding master trusts.

In its consultation document published today, the regulator has stated that decision-making powers are often vested with the provider rather than the trustees of a master trust. In addition, many master trusts have complex and opaque investment structures, and many conflicts of interests arise as a result of a relationship between the provider and trustees.

Therefore the regulator commented that it “will expect master trusts to implement voluntary disclosure that will enable them to demonstrate consistency with standards on the DC code and DC regulatory guidance”.

Further it added that it expects master trusts to obtain independent assurance that will provide an additional layer of rigour and enable schemes to demonstrate that they are credible and viable.

B&CE director of customer solutions Jamie Fiveash said: “It’s good to see that TPR recognises the important role of large master trusts under automatic enrolment and that they warrant separate attention. They are generally ‘provider owned’ and therefore sit somewhere between group personal pensions and single trust-based schemes – so in many cases regulation does not always fit or in some cases does not exist.

“Master trusts are not very well understood in the way in which they are governed and this has led to misunderstanding around issues, such as conflicts of interests. It is good to see that the regulator has taken a sensible approach in terms of what they expect from trustees and seems to have a better understanding of the differences between master trusts and single employer trusts,” he added.

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