Hogan Lovells

Key Dates

Consultation response on draft regulations issued on 19 March 2018.

Consultation paper and draft regulations issued on 30 November 2017. 

Draft Code of Practice issued by the Pensions Regulator on 27 March 2018.  Consultation closes on 8 May 2018.

The Occupational Pension Schemes (Master Trusts) Regulations 2018 expected in force on 1 October 2018.


Summary

The DWP has issued a response to consultation on regulations concerning the authorisation of Master Trusts.  At the same time, the Pensions Regulator has issued a draft Code of Practice on the authorisation and supervision of Master Trusts.

Key points from the consultation and  consultation response include the following.

Scope

The regulations seek to restrict the authorisation regime to schemes which face the risks associated with being a Master Trust scheme at present or in the future.  According to the consultation response, a number of representation were made that various categories of scheme should not fall within the authorisation regime.  However, following consultation the government does not intend to introduce any new complete disapplications.

Provisions set out in the draft regulations included the following.

o    active members have been transferred to an employer outside the corporate group (within the previous six months if the transfer was not a TUPE transfer); or

o    an employer holds or controls (or has held or controlled within the previous six months) at least 33% of the voting power in another employer.

o    industry-wide schemes which on 20 October 2016 were providing defined (DB) benefits (whether or not alongside defined contribution (DC) benefits), provided that the scheme is closed to new members no later than six months after the authorisation requirement comes into force.  Following consultation, the government has rejected calls to allow such schemes to continue to introduce new DB members without having to become authorised, where the new members are accepted so that the scheme continues to have a statutory employer for the purposes of section 318 of the Pension Schemes Act 2004;

o    DB schemes in which the only DC benefits are additional voluntary contributions being accrued by active DB members or result from transfers in by active DB members.

o    small self-administered schemes (SSASs), provided that the majority of the trustees are scheme members; and

o    single member schemes where more than one employer is contributing on a member's behalf (which could otherwise fall within the definition of a Master Trust).   

o    "cluster schemes": in which multiple schemes have only a single employer, or connected employers, but are in practice subject to common rules or controlled in a common way; and

o    parallel accumulation and decumulation schemes: where a schemes is set up to provide retirement options for members of a Master Trust scheme with which it shares common rules or is under common control. 

Requirements for scheme funder where all scheme funders are participating employers

Authorisation process and criteria

o    whether a person involved with a Master Trust is fit and proper;

o    the financial sustainability of a Master Trust;

o    the contents of a Master Trust's business plan (including that it must comply with any requirements in a Code of Practice from the Regulator);

o    whether a Master Trust's systems and processes are sufficient; and

o    the adequacy of a Master Trust's continuity strategy.

o    a flat fee for new Master Trust schemes of £23,000; and

o    a flat fee for transitional Master Trust schemes of £41,000.


Scheme funder: exemption from prohibition on other activities

Ongoing controls and monitoring

o    Triggering events: notification to the Regulator within seven days; notification to employers within 14 days of the event occurring (or, if later, of the notifier becoming aware of the triggering event);

o    Resolving a triggering event: notification to the Regulator within 14 days of the date on which the trustees consider the triggering event was resolved.




Date Accessed: 03/12/2021