Master trust schemes that wish to continue in business after 31 March 2019 are currently applying for their authorisation badge from The Pensions Regulator (TPR). However, getting that badge is only stage one. During stage two, there will be continued supervision of the master trust by TPR, on a scale which has not been seen before.
Employers who use a master trust to meet their automatic enrolment obligations will expect it to continue in business and carry on meeting expectations; choosing a scheme that provides good administration, investment performance and communication should, in practice, reflect well on the employer. For this reason, organisations have a vested interest in the master trust supervision process, which is essentially a risk management process.
Any master trust that falls short in the supervision process could suffer regulatory consequences. This could mean the temporary suspension of new contributions or, in a worst-case scenario, losing its authorisation badge, which will result in the winding up of the scheme.
The trustees of a master trust must notify employers if certain events happen; potentially, there could be a suspension of some services. Although this should not happen often, and hopefully any situation would be quickly resolved, employers should, in the main, be aware of arising issues to avoid unpleasant surprises.
In future, employers could also see references to supervision in updates from master trusts, possibly in the trustee chair’s annual statement. It could also be the case that TPR will look for feedback from employers and members about how the master trust is engaging with them, and how smoothly its systems and processes operate.
Helen Ball, Partner and Head of DC at Sackers