Around 30 master trusts are exiting or are expected to exit the market as new legislation around the fit and proper running of master trusts comes into force today, 1 October 2018.

Master trusts now have six months to apply to The Pensions Regulator for authorisation, to meet new standards around holding sufficient financial reserves and robust systems and adequate plans in place to operate in the market.

The latest figures mean that there are now 58 schemes which will either apply for authorisation or exit the market over the next six months.

TPR executive director for frontline regulation, Nicola Parish, said: “We pushed for extra protections around this market and are pleased that the law has come into force today.

“The success of automatic enrolment has led to rapid growth in master trusts. Authorisation and supervision is vital to ensure 10 million savers can have confidence that their retirement savings are safe.”

Once authorised, TPR will supervise schemes to ensure they continue to meet their legal duties.

“We have worked hard to ensure we have been clear about the evidence we require from master trusts to demonstrate they meet the standards laid out in law. It is now up to trustees to review the code of practice and guidance, and submit applications through our portal, which opens today.”

Barnett Waddingham senior consultant, Malcolm McLean, said: “The introduction of the new authorisation process coincides with the new tougher approach that TPR is taking across its range of activities and, in relation to the suitability or otherwise of individual market trusts, is clearly no bad thing.

“Some master trusts are too small to be economically viable, while in other cases there have been claims of malpractice. In addition, savers with money invested in master trusts aren’t automatically protected by the Financial Services Compensation Scheme – so if a scheme were to go bust, their money could be at risk.”

The regulator has been in close contact with the schemes, allowing them to submit draft applications prior to the authorisation process.

Aegon head of pensions, Kate Smith, added: “This new regulation will drive up standards and make master trusts more financially sound, but most importantly offer greater protection to members.

“Already 30 master trusts have decided not to apply for authorisation and have exited or are exiting the market. More will follow as stronger regulation and ongoing supervision bites, potentially cutting the number of schemes in half in a year or so.”

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