The Pensions Regulator has launched for consultation its code of practice for master trust authorisation, after lobbying the government for “stricter rules”.

Published today, 27 March 2018, the consultation will outline what is expected of master trusts applying for authorisation, and confirmed that new schemes will be subject to tighter supervision once authorised.

The consultation will run until the 8 May 2018 and from the 1 October existing schemes will have six months to apply to the regulator for authorisation.

TPR acting director of regulatory policy, Anthony Raymond, said: “As the master trust market grew we had concerns about the lack of regulation for these schemes and so we lobbied the government for stricter rules.

“The publication of our code of practice marks another important step towards establishing a market with stronger safeguards and which pension savers can have confidence in.”

The master trust market has grown from 270,000 members in 2010 to almost 10 million people with £16bn of savings in 2018.

The code outlines that trusts must continue to meet authorisation criteria on an ongoing basis, and TPR head of master trusts Kim Brown said that new master trusts will be subject to greater supervision.

Earlier this month the Department for Work and Pensions said that master trusts must report their financial information to TPR, and confirmed that a split fee would be in place, with new master trusts being charged £23,000 compared to £41,000 for those already in the market.

Discussing whether a lower entry fee for new trusts means standards won’t be upheld, Brown said: “The evidence they [new master trusts] will have to provide at authorisation may be less than existing schemes, but they will prove to us through supervision that they will achieve the authorisation standard on an ongoing basis.

“So what that means is there won’t be any lower barriers, they will still have to meet the authorisation criteria, it just means our supervision will be tighter for new schemes.”

Brown added that tighter supervision of new master trusts will be ongoing until the regulator is satisfied.

DWP expects that 56 schemes will remain in the market, down from the current 81 and calculate that the net annual costs to trusts will be £2.6m.

In regards to the timeline for new and old schemes, Brown believes that trusts have had more than enough time to engage with the authorisation material and is “confident” that it will be a “smooth” process.

TPR said it hopes to complete its assessment six months of receiving the application.

Furthermore, if a master trust is initially rejected for authorisation, it will have 28 days to gather additional information to support submission, or withdraw its application.

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