Helen Ball, Partner and Head of DC at Sackers, commented: “These regulations are helpful, but there are still many unanswered questions. For example we haven’t been given much clarity around what standards master trusts will actually need to meet to be authorised by The Pensions Regulator.
“A key concern for master trusts has been around the “financial sustainability” requirements which were trailed in the Pension Schemes Act 2017. Whilst the draft regulations do include a list of factors the Regulator must take into account, there remains a lack of visibility over how it will assess these sustainability factors. This is perhaps inevitable, as master trusts take many forms and the legislation needs to cater for differences in the ways these schemes are supported financially.”
Ball continued: “Another area of concern had been the requirement that scheme funders could only carry out activities relating to the master trust. Insurer-sponsored master trusts, in particular, felt that this was unnecessary. The draft regulations’ inclusion of a facility to apply to be exempt from this requirement, rather than attempting to set out what kind of entities will be exempt, again gives the Regulator a lot of discretion without much clarity.
“The planned consultation on a code of practice and operational guidance over the coming months should provide more, much needed, clarity on what the draft regulations will mean in practice. In the meantime, they do give a strong steer on the direction of travel and the Regulator’s areas of focus. Master trusts should be assessing these matters in deciding whether they wish to apply for authorisation or need to plan for an orderly wind-up.”
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