All master trust schemes will have apply for authorisation through The Pensions Regulator (TPR) to prove they meet tough minimum standards under a new law that comes into force today.
The legislation is designed to increase protections for 10 million UK savers, and requires master trusts to show they have sufficient financial reserves and robust systems in place.
TPR will then monitor all successful applicants to ensure they continue to meet their legal duties, and has today published a revised supervision and enforcement policy.
A total of 30 schemes have already decided to exit the market, leaving 58 master trusts that still need to apply for authorisation with TPR within six months.
"The success of automatic enrolment has led to rapid growth in master trusts," TPR executive director for frontline regulation, Nicola Parish, said.
"Authorisation and supervision is vital to ensure savers can have confidence that their savings are safe. We are pleased that the law has come into force today."
The legislation requires schemes to provide evidence in five areas: financial sustainability, systems and processes, continuity strategy, scheme funder, and fit and proper persons.
TPR has published a code of practice and guidance with the support of the industry, and has given schemes an opportunity to provide draft applications and receive detailed feedback.
Barnett Waddingham senior consultant, Malcolm McLean, highlighted how the Financial Services Compensation Scheme does not protect savers with money invested in master trusts.
He said the new rules could provide better security for these savers, address claims of malpractice, and prevent authorisation for schemes that are too small to be economically viable.
"We should welcome a new regime which seeks to stabilise a market that may be dangerously out of control, and hope TPR will be able to weed out schemes that fall short of the standards required," he continued.
"It is likely the numbers of approved master trust schemes will reduce substantially following the completion of this exercise."
