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UK pensions regulator given power to oversee master trusts

The UK’s Pensions Regulator (TPR) is to be granted greater powers to regulate the growing master trust market under plans announced by government.

The government, unveiling its legislative agenda for the next year as part of the Queen’s Speech, confirmed its earlier pledge to change the way the market is regulated. 

Although not directly mentioned by the British monarch during her speech to Parliament, the forthcoming Pensions Bill will also cap early-exit fees charged by trust-based pension providers.

Pensions minister Ros Altmann said the bill would provide “essential protections” for members of master trusts, with any new master trusts entering the market expected to meet “strict new criteria”, according to the government.

The announcement comes after repeated calls from the regulator to grant it further powers to scrutinise the master trust market, which has been taking in the vast majority of new pension savers enrolled into an occupational scheme as the UK continues with its auto-enrolment reforms.

Andrew Warwick-Thompson, executive director for regulatory policy at TPR, has previously told IPE the growing number of master trusts – estimated to be more than 100, with 73 active – needed to be restricted.

“We need to think very hard about how we prevent more master trusts coming into the market, and what we do with those that struggle to reach any kind of sustainable level of business in the next year or so,” he said in January.

In April, he then hinted that a licensing regime might be forthcoming

However, Altmann said in an interview with IPE in early May she was opposed to the idea of restricting the number of master trusts.

“Let a thousand flowers bloom,” she said. “I am happy for as many master trusts to set up as want to as long as members’ money is protected – and there are proper controls on who can set them up and what they can do.”

Tom Barton of law firm Pinsent Masons questioned whether the greater powers granted TPR came too late.

“There are already very large numbers of master trusts up and running and taking in contributions,” he said.

“This looks like a fairly belated attempt to create a barrier to entry – unless it is to apply to existing schemes, too.”

Kate Smith, head of pensions at Aegon UK, echoed Barton’s call for the stricter entry requirements to be retrospective.

“All existing master trusts must demonstrate they meet the new criteria or have plans in place to achieve them within a reasonable timeframe,” she said.

“This should give confidence to all pension savers.”

IPE’s full interview with Ros Altmann will be published in the upcoming June issue of IPE

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