Authorisation criteria
Section 7: Fit and proper persons requirement
Section 7 sets out a requirement that the Pensions Regulator must decide if key persons in the scheme are fit and proper to act in their roles. These roles are: a person who establishes the scheme, a trustee of the scheme, a person who has the power to appoint and remove trustees, a person who has the power to amend the scheme, a scheme funder and a scheme strategist. Additional roles subject to a fit and proper test may be added by regulations under subsection (2)(h).
In addition, subsection (3) enables the Pensions Regulator to determine the fitness and propriety of further persons in the capacities mentioned in that subsection. Under this provision the Regulator may assess persons who promote or market a Master Trust scheme and other roles that may be set out in regulations made under subsection (3)(b).
Under subsection (4), when the Pensions Regulator makes its assessment, it must take into account any matters that are specified in regulations made by the Department (subsection (4)(a)).
The Pensions Regulator may also take into account other matters, including matters relating to a person who is connected with that person (subsection (4)(b)). Subsection (5) sets out the circumstances in which persons can be considered to be connected with each other, for example, persons who are directors, or shadow directors, of the same company or where a trustee is able to exercise a power under the trust to benefit a specific person.
Subsection (7) provides that the first regulations made under subsection (4) are subject to the confirmatory procedure.
Subsection (8) provides that any subsequent regulations made under subsection (4) and any regulations made under subsections (2) and (3) are subject to negative resolution.
Section 8: Financial sustainability requirement
Section 8 provides that the Pensions Regulator must be satisfied that a Master Trust has a sound business strategy and sufficient financial resources to meet the costs of setting up and running the scheme, and to comply with requirements to protect members where an event occurs that may lead to the scheme closing or winding up (see sections 20 to 33 in relation to triggering events and continuity options).
Subsection (4) provides a power for the Department to make regulations on matters that the Pensions Regulator must take into account in deciding if it is satisfied that a Master Trust meets the financial sustainability authorisation criteria. These regulations may include, but are not limited to, the information the Pensions Regulator must take into account (such as the scheme’s business plan and accounts) under subsection (5)(a), and also the financial requirements to be met by the scheme or the scheme funder under subsection (5)(b).
Subsections (6) and (7) provide that the first regulations made under this section are subject to the confirmatory procedure and that any subsequent regulations are subject to negative resolution.
Section 9: Financial sustainability requirement: business plan
Section 9 provides that a Master Trust must have a business plan prepared by the scheme strategist (subsection (1)) and approved by the scheme funder, any other scheme strategist and the trustees (subsection (5)). Subsection (2) provides a power for the Department to make regulations setting out information to be included, and other requirements, in relation to the business plan. The business plan must be reviewed by the scheme strategist at least annually and revised if appropriate, and must be revised at any time in the event of a significant change to the information set out in the plan.
Subsection (6) sets out that the business plan, and supporting documentation, must be provided to the Pensions Regulator by the scheme strategist or trustees when the scheme applies for authorisation, and within three months of the plan being revised or on request by the Pensions Regulator.
Subsections (7) and (8) provide that the first regulations made under this section are subject to the confirmatory procedure and that any subsequent regulations are subject to negative resolution.
Section 10: Scheme funder requirements
Section 10 makes provision about a Master Trust’s scheme funder and the requirements that it must meet for authorisation.
Subsection (2) requires the scheme funder to be a body corporate or partnership that is a legal person under the law by which it is governed.
Subsection (3) requires the scheme funder only to carry out activities that relate directly to the Master Trust (or Trusts) for which it is the scheme funder or prospective scheme funder.
Subsections (4) and (5) provide a regulation-making power for the Department to make exceptions to the requirement in subsection (3) if the scheme funder meets additional requirements specified in the regulations. These regulations may, for example, provide an exception where the scheme funder meets additional requirements in relation to its financial position or business activities or provides specified information to satisfy the Pensions Regulator of the Master Trust’s financial sustainability.
Subsection (6) provides a power for the Department to make regulations that set out requirements in relation to the scheme funder’s accounts. The first regulations made under subsection (4) are subject to the confirmatory procedure while any subsequent regulations and regulations made under subsection (6) are subject to negative resolution.
Section 11: Systems and processes requirements
This section provides a power for the Department to make regulations in relation to the adequacy of a Master Trust’s systems and processes. Having adequate systems and processes is one of the five authorisation criteria which a Master Trust must meet to be authorised, and to remain authorised. The Pensions Regulator must take into account the matters set out in these regulations when satisfying itself as to whether the scheme meets the systems and processes authorisation criterion.
The section also provides a non-exhaustive list of the matters concerning systems and processes about which the Department may make regulations. These include, but are not limited to, the standards, functions and maintenance of IT systems, and processes relating to the appointment and removal of trustees.
Subsections (5) and (6) provide that the first regulations made under this section are subject to the confirmatory procedure and that any subsequent regulations are subject to negative resolution.
Section 12: Continuity strategy requirement
Section 12 provides that the scheme strategist must prepare a continuity strategy which sets out how members will be protected if a Master Trust has a triggering event; the strategy must also include a section setting out the levels of administration charges that apply in relation to members of the scheme (subsection (4)). The Pensions Regulator will need to determine if it is satisfied that the strategy is adequate as part of the authorisation decision (see section 5).
Triggering events are set out in section 21 and are events which are likely to lead to the scheme failing or being de-authorised. Subsection (6) provides a power for the Department to make regulations on other information that may be required, for example, the detail to be included in relation to levels of administration charges, and how the strategy must be prepared (subsection (5)).
The scheme strategist is also required to review the strategy and revise it as appropriate (subsection (7)). The strategy, and any revisions, must be approved by the trustees, any other scheme strategist and each scheme funder (subsection (8)).
The continuity strategy must be submitted to the Pensions Regulator by the scheme strategist or trustees when applying for authorisation, and within three months of revising the strategy, or on request by the Pensions Regulator.
Subsections (10) and (11) provide that the first regulations made under this section are subject to the confirmatory procedure and that any subsequent regulations are subject to negative resolution.
