As we head towards the end of the year, it’s a good opportunity to review how far we’ve come and to look forward to the challenges ahead.


In the area of master trusts, we’ve come a long way. This time last year, schemes were busy preparing and submitting their applications for master trust authorisation and TPR had begun to receive applications.

Now, 12 months on, we have almost finished the authorisation of existing schemes and have a market of master trusts that millions of savers can be assured meet high standards.

We don’t have a view on what the size of the market should be – our focus is to drive up standards but, as expected, there has been some scheme consolidation.

But our work to ensure master trusts are well governed doesn’t stop with authorisation. Through supervision we’ll continue to work with authorised schemes to ensure high standards are maintained and schemes continue to focus on delivering positive outcomes for members.

We’ve learned a great deal about master trusts and the market through authorisation, and we’ve started to build good one-to-one working relationships with those running schemes. We’ve learned about the different financial models that schemes operate and how the different relationships in each master trust work. This is valuable information to us as we now enter the supervision phase.

In the first year after authorisation, the intensity of supervision will be driven by the potential impact of each master trust’s failure on the market, including the number of members in the scheme and our view on the risk of failure.

We’ll be undertaking a range of activities which will involve engaging with trustees, strategists, funders and other relevant people including the scheme administrator.

These will include:
• periodic scheme evaluations
• proactive monitoring of particular concerns across the market
• requesting a supervisory return to be completed annually
• reviewing regular and ad-hoc information such as chair’s statements, scheme funder accounts, annual report and accounts, and trustees’ business plans to check that schemes continue to meet the authorisation criteria
• reviewing significant and triggering events and identifying the impact on the scheme.

We expect those responsible for master trusts to be open, honest and transparent with us – and they should contact us if they’re concerned about any emerging risks which could affect the scheme’s ability to continue to meet the authorisation criteria.

Master trusts are trail blazers and through our Future of Trusteeship work to drive up standards, we expect all DC schemes to look at master trusts as exemplars – and think about how they too can improve their governance standards and safeguards, to better protect savers.

Through master trust supervision – we are not here to catch schemes out – we want to work with them to help ensure they stay on track.

Supervision

This approach aligns with our supervision of other schemes we regulate.

Through relationship supervision, we are now engaged with significantly more schemes, targeting them through new initiatives across a broad range of areas.

To date we have been working on a one-toone basis with more than 30 public service, defined benefit (DB), hybrid, and defined contribution (DC) schemes, and we will be extending this supervision to beyond 100 schemes this financial year.

Relationship supervision is not only focused on schemes of strategic importance. It also involves more direct contact with large numbers of schemes, using data we hold to target them in relation to particular elements of governance and administration. We will give clear direction about the standards that schemes are expected to meet, and what the consequences of failing to meet those standards could be.

Record keeping

An example of this approach is that we’re now asking the trustee boards of 400 schemes to examine the data they hold to ensure it is accurate and up to date. We’ve set a six-month deadline by which trustees will be required to report back to us.

Schemes targeted in this crackdown are all types and sizes which we believe have neglected to review their data in the last three years. We’ll also be writing to 1,200 schemes prompting them to carry out data reviews every three years.

Good data is key to good scheme governance – and it is also essential to the Government’s dashboard plans; the dashboard will only be as good as the data it holds.

Whether it is poor record-keeping or other practices which put the scheme at risk, where necessary, we will use our powers to prosecute people when they put savers at risk.

But we’re not an enforcement-led regulator – we would much rather those we regulate work within the law, within our guidelines and with us.


Kim Brown
Head of Master Trusts – The Pensions Regulator

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