The Pension Schemes Bill hands the regulator some tough new powers

The government has set out plans to impose capital requirements on mastertrusts and hand the Pensions Regulator more powers to intervene in the sector.


The Pension Schemes Bill, introduced in the House of Lords today, will require mastertrusts to have a capital buffer to allow them to safely wind up if necessary.

It also introduces a fit and proper person test for those running or overseeing schemes, and gives TPR the power to de-authorise schemes that fail this test, are poorly run, or have an unsustainable business plan.

The regulator welcomed the bill, with executive director for regulatory policy Andrew Warwick-Thompson (pictured) describing it as a “game changer.” 

“For the first time, mastertrusts will have to be authorised by us before they can open for business,” he said. 

“To remain in the market they will also have to demonstrate to us on an ongoing basis that they continue to meet the strict authorisation criteria, including provisions to ensure member funds are protected in the event of a scheme wind up. 

“These are tough new measures which will provide consumers and employers with confidence that the mastertrust market is a safe place to invest their pension contributions.” 

Mastertrusts were quick to welcome the bill. The People’s Pensions director of policy and market engagement Darren Philp said it was unlikely that all mastertrusts would survive, and members would need their assets protecting while the market consolidated. 

“We need quality standards to be met before players can operate in the market, including proper scrutiny of the people who run schemes. Most importantly, we need to make sure that savers do not see their pension pots damaged by covering the cost of collapsing schemes – or, worst of all, lose their savings entirely. ”

But Now: Pensions chief executive Morten Nilsson said the proposed capital rules – which require schemes to have a enough money to run on for at least six months after a provider went bust - did not go far enough. 

“One of the main areas of focus has been ensuring providers have sufficient capital,” he said. “While the Pensions Bill tackles this to a large extent, which should help drive market consolidation, there are no de minimis capital requirements for providers entering the market which is a grave oversight. Providers should not be able to set up a mastertrust and accept pension contributions from savers if they have no solid financial foundations.” 

Nilsson was also disappointed that the governmnet had decided against making the Mastertrust Assurance Framework mandatory. 

“The voluntary assurance framework was introduced as a quality standard to enable trustees of mastertrusts to demonstrate high standards of scheme governance and administration and making it compulsory and building on this existing framework seemed logical,” he said.