Thirty U.K. multiemployer plans, also known as master trusts, so far have decided to shut down due to introduction of new legal requirements.
The U.K. Pensions Regulator introduced a master trust authorization Mondayin an effort to raise standards for the plans' 10 million participants. These plans have until March 31 to either file for legal authorization or exit the market.
Plans must show they meet requirements in five areas. The fit and proper requirement mandates that staffers with a significant role in running the plan meet a standard of honesty, integrity and knowledge appropriate to their positions. The second requirement relates to systems and processes, saying information technology systems must enable the plan to run properly, and robust processes for administration and governance must be in place.
Requirement three relates to a continuity strategy, with a plan in place to protect participants if something happens that may threaten the existence of the master trust, including how it would be shut down. The fourth standard requires those named to support the plan carry out only master trust business. The final requirement is financial sustainability, with the need for the master trust to have the financial resources to cover running costs and to wind up the plan should it fail, without impacting participants.
The regulator said Monday that, as of Sept. 19, it had identified 88 master trusts in the U.K. market.
"We expected the introduction of authorization to drive consolidation of the market, and we have already seen evidence of this happening," a TPR report said. Three master trusts have already closed and another 27 decided not to apply for authorization and will shut down. Participants will transfer to an alternative master trust or other appropriate vehicle, the report said.
The remaining 58 master trusts are expected to either apply for authorization or exit from the market in the coming months, TPR's report said.
"Authorization will increase the quality of master trust products and providers and therefore increase protection for members. For those master trusts that choose to exit the market or fail to get authorized, we will oversee the process to satisfy ourselves that members are being transferred in a safe and timely manner and employers continue to meet their (automatic enrollment) duties — taking enforcement action if necessary. We have already supported the 30 schemes that have exited or plan to exit the market," TPR said in the report.
The regulator will update master trust figures each month and include the number of plans that have applied for authorization.