UK Regulator Authorises First DC Master Trust

Willis Towers Watson’s £2.5bn (€2.9bn) LifeSight master trust has become the first pension fund to be fully authorised as an auto-enrolment provider in the UK.

The Pensions Regulator (TPR) announced this morning that LifeSight had successfully passed its authorisation process. All multi-employer defined contribution (DC) schemes must apply to TPR by the end of next month in order to keep operating as auto-enrolment providers.

Nicola Parish, executive director of frontline regulation at TPR, said: “The first authorisation of a master trust is a landmark moment and a step towards a market of schemes with better safeguards around them.

“By the end of the year every master trust that continues to operate will have proven that its scheme and its trustees meet the standards laid out in the legislation and our code of practice. This will better protect the millions of members and billions of pounds in those schemes.

“Authorised master trusts are a good option both for employers looking to fulfil their automatic enrolment duties and for trustees of schemes who are looking to consolidate.”

The rules require master trusts to demonstrate they have sufficient capital reserves, robust systems, and “fit and proper” senior staff.

Fiona Matthews, managing director of LifeSight, said: “Being the first master trust to reach this landmark is a testament to the service we offer our members and clients, giving them the assurance that they are with the right provider.

“We expect that authorisation will give schemes that have been waiting and watching developments the confidence to make the switch to master trust.”

The first of many?

Barnett Waddingham’s head of DC Mark Futcher said he expected “quite a few more” master trusts to be authorised before the window for applications to TPR closes on 31 March.

“Of course, we are yet to see the first master trust not to receive authorisation and this will show us the true strength of the authorisation regime,” he added.

Jesal Mistry, senior investment consultant at Hymans Robertson, questioned whether a potential “bottle neck” of applications to TPR would cause delays to further authorisations, “leading to the question of whether there might be an advantage to having been authorised first”.

As many as 30 master trusts are expected to exit the market during the authorisation process. Last year, the Salvus Master Trust bought the Complete Master Trust, and Smart Pension is set to take on the Corporate Pensions Trust, a £12.5m master trust run by financial advisory firm Lighthouse Group, if Smart passes TPR’s authorisation process.

Last month, the UK government pledged a “contingent liability” of £329m to help the National Employment Savings Trust (NEST) qualify as a master trust under TPR’s rules.