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U.K. regulation would make multiemployer DC plans get reauthorized

Master trusts will have to pay a flat fee and get reauthorized to continue to operate in the defined contribution market in the U.K. under a new regulation that is set to go into effect Oct.1, the U.K. government said Monday after an industry consultation.

Under the planned regulatory changes, the U.K. government will require multiemployer DC plans, known as master trusts, to gain new authorization to stay in the market and will impose a one-time authorization charge of £41,000 ($57,153) for existing plans. The U.K. government will separately introduce a fee of £23,000 for master trusts that are entering the market for the first time, the government confirmed.

The regulatory effort aims to improve the standards and transparency of multiemployer plans and weed out inadequate DC providers.

The consultation respondents — trustees and plan sponsors — welcomed the new supervisory regime for plans and authorization process during the consultation process. They also agreed that the "master trust market isn't adequately regulated," according to the consultation documents.

Troy Clutterbuck, interim CEO of the £493 million NOW: Pensions, London said in an emailed comment: "We have long campaigned for tighter regulation of master trusts and wholeheartedly support the new regulations being introduced to protect savers. While it's essential that master trusts hold sufficient capital to meet the costs of windup, I fear there is a risk of overcooking the capital requirements. Master trusts are far from homogeneous and the capital requirements need to be flexible enough to accommodate different providers' business models."

The master trust regulation will next be presented to the U.K. Parliament and is planned to come into force Oct.1.