LifeSight is the first master trust to be authorised by TPR’s master trust authorisation and supervision regime which began on 1 October 2018 (see Alison’s article on the introduction of this new regime in September 2018). The authorisation process requires schemes to outline how they meet required standards in aspects such as level of reserves and the qualifications of the individuals running the scheme.
The window for master trust authorisation applications runs to the end of March 2019 (a deadline which can be extended for 6 weeks but only if the scheme can show a good reason for the delay). As at 6 March, the Pensions Regulator had received only 13 applications for authorisation compared to the 74 master trusts which were registered with the Regulator at the end of 2018. TPR will be expecting a rush of applications before the end of the month, but a large portion of schemes are also choosing to drop out of the market with benefits transferred in bulk elsewhere. At 6 March, 39 schemes had either exited the market or notified TPR of a trigger event to exit.
The authorisation regime was introduced to ensure protections for members of master trusts that are equivalent to those in other types of pension schemes. Master trusts will need to have:
- fit and proper individuals involved in the running of the scheme, meeting the standard of honesty, integrity and knowledge appropriate to their role;
- sufficient robust IT systems and processes in place to effectively govern the scheme;
- continuity planning, with a strategy that TPR finds credible;
- a scheme funder (a company or partnership) which only carries out activities relating directly to master trusts and which can show clear evidence that it is able to financially support the master trust; and
- financial sustainability, with a business plan setting out expected activities, growth and sources of funding.
In our view, the authorisation regime improves options for members and employers in the busy DC marketplace and we expect to see an increase in transfers to master trusts in the coming months and years.