Pension savers’ money will have stronger protections as a new law to drive up standards in schemes used by millions of people to save for retirement has come into force.
Master trust schemes will now have to apply to the Pensions Regulator (TPR) for authorisation to show they meet the tough new standards designed to increase safeguards for 10 million members.
In 2016, the Commons Work and Pensions Committee expressed concern about the development of “potentially unstable” master trusts, which provide occupational pension schemes for multiple employers who are otherwise unconnected.
Master trusts can offer value for members and employers due to their scale.
But TPR previously expressed concern it was not able to exercise stronger regulation over them.
Under the legislation, master trusts must have fit and proper people, sufficient financial reserves, robust systems and adequate plans in place to get authorisation and operate in the market.
TPR will then supervise schemes to ensure they continue to meet their legal duties.
Existing master trust schemes now have six months to file an application to TPR for authorisation to continue to operate in the market, while new master trusts must be authorised before they open for business.
TPR said so far, 30 master trusts have exited or are exiting the market, leaving 58 which will either need to apply for authorisation or exit in the coming months.
Nicola Parish, executive director for frontline regulation at TPR, 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.”