The Pension Schemes Bill
The Pension Schemes Bill has been introduced into Parliament and proposes new regulation for Master Trusts to be authorised and supervised by the Pensions Regulator.
New authorisation and supervision regime for Master Trusts
The Pension Schemes Bill proposes that Master Trusts must meet five key criteria to be authorised by the Pensions Regulator before they can start operating. The criteria are:
- The persons involved in the scheme are fit and proper persons to act in their roles - these roles are: the person who establishes the scheme; trustee of the scheme; those with power to appoint and remove trustees; those with power to amend the scheme’s trust deed (where established under trust); the scheme founder; and the scheme strategist. The Pensions Regulator will have power to determine the fitness and propriety of other individuals where considered appropriate, which would include those who promote or market a Master Trust.
- The scheme is financially sustainable - with a sound business strategy and sufficient financial resources to meet the costs of setting up and running the scheme.
- The scheme funder meets certain requirements in order to provide assurance about its financial situation.
- Systems and processes in running the scheme are sufficient to ensure it is run effectively.
- The scheme has an adequate continuity strategy – this must contain details as to how the interests of members of the scheme are to be protected if a “triggering event” occurs in relation to the scheme. These events include new powers for the Pensions Regulator to intervene where schemes are at risk of failing or being de-authorised.
The Pensions Regulator must make the decision to grant authorisation within six months of receiving the application.
Existing Master Trusts will be brought into the regime and will be required to meet the new criteria.
The Pensions Regulator will be required to publish and maintain a list of authorised Master Trusts and there will be on-going supervisory requirements applicable to the Master Trusts.
The Pension Schemes Bill also proposes changes to existing legislation to support the government’s intention to:
- introduce a cap on early exit charges; and
- ban member-borne commission charges arising under existing arrangements in certain occupational pension schemes. (Member-borne commission charges under new arrangements were banned from April 2016.)
A second reading of the Pension Schemes Bill will take place in the House of Lords on 1 November.
A link to the Pensions Schemes Bill can be found here.