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Master trusts are a popular occupational pension scheme. They are more cost-effective for employers as they pool together workplace schemes into a fund that is managed by one provider.
Master trusts have become increasingly popular over the last decade. For example, since 2012 the number of master trust members has increased by 200,000 and they now have a combined £10 billion worth of assets invested. This has largely been due to the introduction of the automatic enrolment requirement for employers.
In 2017, a new law was enacted introducing new tests which master trust providers must pass to ensure that they are fit and proper, have a financial plan and IT and governance processes. The rationale behind this was to protect members who may currently be at risk from many schemes that do not meet the minimum governance standards.
These new requirements will have a dramatic effect on the master trust market. Indeed, it has been stated by the Pensions Regulator that around 25% of the 90 master trust providers will be wound up as a result of the new law. The remaining master trusts are expected to either apply for authorisation or leave the market.
The good news for employees is that the biggest schemes in the market are expected to apply for authorisation and remain intact. While some master trust providers will inevitably have to leave the market, the Pensions Regulator will ensure that they select another provider to operate the scheme under the requirement that workers cannot be moved to a scheme of poorer value.
Overall, the new master trust regime is welcomed as the stricter requirements provide better protection for consumers.
If you need advice or assistance on retirement planning and pensions, Prosperity Financial can help. Call us today on 0141 337 1346 or complete our online enquiry form and a member of our team will get right back to you.
