The Pensions Regulator has welcomed the government’s Pension Schemes Bill, which is a “game changer” for master trust pension schemes.

The Bill, which was laid before parliament yesterday, with its details published today, will give the regulator the power to authorise and de-authorise master trusts according to strict authorisation criteria.

TPR executive director for regulatory policy Andrew Warwick-Thompson said they have “long-called” for much stricter controls on master trust schemes and voiced concerns over the current very low barriers to market entry.

“We welcome the Pension Schemes Bill as a game changer. For the first time, master trusts will have to be authorised by us before they can open for business. To remain in the market they will also have to demonstrate to us on an ongoing basis that they continue to meet the strict authorisation criteria, including provisions to ensure member funds are protected in the event of a scheme wind up,” he said.

“These are tough new measures which will provide consumers and employers with confidence that the master trust market is a safe place to invest their pension contributions.”

Others in the industry have also welcomed the Bill with Hargreaves Lansdown senior pension analyst Nathan Long declaring it the “death knell for badly run master trusts”.

“Many current members will not have chosen membership, having been enrolled automatically by their employer. There is a group of very well run master trust schemes for whom compliance will be little more than a formality, however there are those for whom this extra regulation will expose their shortcomings.

“No member should lose their accrued pension savings as a result of a pension scheme getting into difficulties. This legislation looks to address the vulnerability that had existed within master trust regulation up until now and this means the cost of wind-up should not fall onto members,” he stated.

Now: Pensions CEO Morten Nilsson added that when they initially entered the market they were shocked at how easy it was to set up a master trust.

“We’ve long campaigned for tighter regulation of master trusts to protect savers. The measures introduced in the Pensions Bill today are much needed, if long overdue, and we are pleased to see its introduction,” he said.

“However, one of the main areas of focus has been ensuring providers have sufficient capital. While the Pensions Bill tackles this to a large extent, which should help drive market consolidation, there are no de minimis capital requirements for providers entering the market, which is a grave oversight. Providers should not be able to set up a master trust and accept pension contributions from savers if they have no solid financial foundations.

”It is disappointing that the master trust assurance framework won’t be made compulsory as part of the licencing regime. The voluntary assurance framework was introduced as a quality standard to enable trustees of master trusts to demonstrate high standards of scheme governance and administration and making it compulsory and building on this existing framework seemed logical.”

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