The Pensions Regulator (TPR) has published a statement today to help trustees of DC master trusts prepare for the proposed new scale requirements in the Pension Schemes Bill.
Building on the Department for Work and Pensions’ (DWP) Policy Principles Paper, TPR’s statement encourages trustees to:
evaluate their potential to grow to scale
develop evidence-based projections
review their operational readiness for the challenges and opportunities ahead.
The statement provides new analysis showing that there is significant momentum and growth potential in the master trust sector as a whole. That is why the regulator urges caution to any advisers and employers second guessing which master trusts not yet at scale will be unable to meet scale within the timescales.
TPR says that employers and advisers should approach selecting a pension scheme in this period of transition focused squarely on saver outcomes. TPR’s statement aims to support a smooth transition to scale. It is intended to reduce uncertainty, and to help trustees, employers and advisers understand the types of analysis and preparation that will be relevant once the requirements come into effect
Richard Knox, Executive Director, Strategy, Policy and Analysis, said: “We want master trusts to consider their potential to grow, understand the evidence that may be needed in future, and assess their operational readiness for the changes proposed in the Bill. By preparing early, trustees can make informed decisions that support long-term value for their savers. Employers and advisers also have a vital role to play, and we encourage them to take a proportionate, balanced approach that focuses on what delivers the best outcomes for members.”
Helping schemes to scale
The Pension Schemes Bill will introduce a requirement for DC master trusts to hold a minimum amount of assets under management (at least £25bn from 2030) in a main scale default arrangement (MSDA), alongside a transition pathway for schemes that need longer to reach scale.
In anticipation of these changes, TPR encourages trustees to begin considering:
How their scheme might grow over time, including analysis of organic and potential inorganic growth.
What evidence might underpin future growth projections, including demographic factors, contribution flows and investment assumptions.
Whether their governance, systems and processes are positioned to support future scale requirements.
How their investment capability and governance align with wider reforms in the Bill.
What these changes could mean for current and future members, including value for money and long-term outcomes.
Employers and employee benefit consultants also play a key role in shaping market outcomes. TPR encourages them to take a balanced, evidence-based approach when selecting or reviewing a master trust, considering:
compliance with AE obligations
value for money, including investment performance and service quality
governance and operational resilience
preparedness for the proposed scale requirements
quality of administration and transition processes
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