The latest figures released about the shape of the master trust market show that one scheme has applied for authorisation so far. Given the window has been open since 1 October 2018 it might seem surprising that more applications have not been received. Based on the discussions we have had with the master trusts themselves, it is pretty much what we expected, although we recognise that plans can and do change.
There is a six-month window, until March 31, within which applications from existing schemes must be filed. We have clearly stated that it is important for master trusts to carefully consider their applications and submit them only when the scheme is best placed to do so, and the application is full and complete. This is important because there is only one shot at applying for authorisation so it’s more important to get it right rather than be early.
Another reason is the work arising from the feedback we gave schemes earlier in the year.
When I joined The Pensions Regulator back in July, the voluntary application process which preceded master trust authorisation was in full swing. We dubbed it a Readiness Review and it was really useful, both for us as a regulator and for the 33 master trusts who took part.
For us it highlighted where our guidance required clarification or further explanation to be clearer about what evidence authorisation applications needed to contain.
The schemes which took part told us that they also found it useful. It gave them individual feedback on where the evidence they supplied was not clear enough or not sufficient for us to make a decision on their applications. We also provided a general feedback document so all the schemes in the industry, not just those who took part, could benefit from the process.
As far as we could see, the main problems stemmed from schemes not thoroughly reading, understanding and considering the legislation, code of practice and guidance around master trust authorisation, which explains what standards need to be evidenced by schemes.
While some of the applications we received were clear and well-ordered and gave us real confidence that schemes were ready for authorisation, others had work to do to clearly evidence that they met the authorisation criteria.
We also know that schemes are taking heed of the advice we provided. We worked hard to make sure our feedback was clear and therefore we expect any application we receive to be of a high standard, clearly explaining and evidencing how the scheme meets the authorisation criteria.
Once applications are filed to TPR, we have six months to reach a decision, which will be taken by the Determinations Panel, which is an independent decision maker. All applications will be considered in line with the legislative requirements.
We will not predetermine the outcome. We have no preference as to which schemes, which types of schemes or how many schemes end up operating in the market of authorised master trusts.
What we care about is akin to the purpose of authorisation – that every scheme in the master trust market has reached the standards laid out in legislation. We will ensure that they also continue to meet those standards as we supervise authorised master trusts.
It will mean that fit and proper people, sufficient financial reserves, robust systems and adequate plans will be in place in the schemes which remain in the market. Ultimately it will mean that the 10 million members in those schemes are better protected.