FOR ACTION

Updates to master trust reserving guidance

Performance-based fees – the details matter

Preparing for technology releases

Significant event (a) trustee appointments

Fraud monitoring and controls

ESSENTIAL READING

Bank of England - informing private markets risk management

Transition Plan Working Group – report due this spring

Fighting pension fraud together

Climate Investing Framework – a useful tool for trustees

FCA Regulatory Priorities Reports

Investing in nature - Nature 101

Kim Goodall-Brown, Director of Defined Contribution and Master Trust Supervision

Hello and welcome to this month’s Master Trust Bulletin. I’m delighted to be introducing it, and to be doing so in my new role as TPR’s director of DC and master trust supervision.

Some of you may know me from my previous roles. Before five years working at Legal & General, where I was head of the master trust and the independent governance committee, I spent 12 years here at TPR working across a range of areas. This included leading the design and delivery of master trust authorisation and supervision.

I’m excited to rejoin TPR and I’m particularly pleased to be returning at such a pivotal time for the DC and master trust landscape. We’re committed to supporting a resilient DC market by ensuring our regulatory impact is targeted to the right areas. This month we updated our regulatory capital reserving guidance. These important changes signal our commitment to helping reduce unnecessary regulatory burdens and drive growth in the interests of savers. We want to empower trustees to review their approach to calculating their reserving funds so they can ensure they have the best mix of assets.

Alongside this work, we are also currently reviewing and engaging with industry on our significant events guidance, and we’ll communicate more on this in due course. You should also look out for a market oversight report on private market investment which we’ll be publishing in early summer following the completion of our industry engagement exercise, and shortly we’ll be publishing new consolidation guidance to help make transferring to a master trust for smaller DC schemes run as smoothly as possible, in addition to refreshed winding up guidance for DC trustees.

Working together is key to ensuring a robust DC market that protects saver outcomes. To support more collaborative working and richer engagement, we are now looking at ways to facilitate more market engagement with the DWP and FCA. Along the same lines, I see ongoing two-way market engagement as key to success in my new role. I look forward to working with you all as we continue to strengthen the market, support good outcomes for savers, and build on the strong foundations already in place. In the meantime, I hope you find this bulletin useful and insightful.

Moving with the times: Updates to master trust reserving guidance

We’ve updated our master trust regulatory reserving guidance and will be publishing new data to support trustees in their decision-making.

As set out in our blog which accompanies the guidance, we want to strip back unnecessary regulatory burden so that schemes can free up capital for productive use and focus on delivering the best possible outcomes for members.

Detailed analysis

Following detailed analysis of financial submissions of master trusts since authorisation, together with engagement with industry bodies and master trusts, we found financial reserves will continue to increase as schemes grow. At the same time, strong governance and risk management mean the likelihood of calling on reserves due to disorderly market exits continues to reduce.

Our updated guidance reflects these trends and enables trustees and scheme strategists to review their approach to calculating their reserves, ensuring they are using the most effective asset mix.

The changes, which also reflect current best practice and our direct experience of supervising master trusts, allow for a more scheme specific approach and removes, or further clarifies, thresholds introduced at authorisation, including minimum liquidity levels and allowance for revenue offsetting. This should allow for a more consistent approach across the market and may allow master trusts to be able to release some capital reserves where it is safe to do so to invest in their business and deliver better value for savers.

Better data

To tackle the challenge of limited market data and enable master trusts to understand how they compare and encourage engagement and transparency, we will also be publishing annual data on reserving practices from 2027.

Later this year (2026), you’ll see changes to our data collection via the Scheme Financial Template. These changes will help us improve quality and consistency, and ultimately enable future data releases.

Read our reserving guidance and blog.

Performance-based fees - the details matter

We’re calling on trustees to check that any advice they receive on performance-based fees should take into account DWP’s statutory guidance, and consider whether any performance-based fee structures meet the requirements for ‘specified performance-based fees’.

The regulations introduced in January 2023 allow trustees to use investment arrangements with performance-based fees, which they can exclude from their charge cap calculations in certain situations.

The regulations also introduced requirements for trustees to:

• report performance-based fees incurred by the scheme in their annual chair’s statement
• assess the extent to which performance-based fees represented good value for members

The regulations set out conditions on what qualifies as a performance-based fee structure for the charge cap exemption. These are referred to in the regulations as ‘specified performance-based’ fees. Performance-based fees that are not considered to meet the criteria for ‘specified performance-based’ fees are not excluded from the charge cap, but they can still be used by schemes.

The guidance provides some support on the broad range of performance-based fee structures that exist and an understanding of their merits. It also sets out further expectations in relation to what performance-based fee structures meet the criteria for ‘specified performance-based’ fees.

We recently completed a market engagement exercise on private market investments and will be publishing a market oversight report on our findings in the coming months. However, one clear theme emerging from our engagement was around fees. While there was acknowledgment that industry had made some progress in recent years in relation to private market fee structures, it was clear that more needed to be done based on the range of concerns raised around, for example:

• the level of fees
• the netting of performance fees across multiple funds
• the level of transparency and the degree of disclosure around fees
  
• the distribution, and reporting, of total fund charges between fund fees and fund costs

We received comments suggesting some fund providers would only provide details of the overall fund level fees, not of the component fund fees. In the absence of further detail, it is not immediately clear that those performance-based fees would meet the requirements for a ‘specified performance-based fee’ in relation to a fund-of-fund structure as required by clauses 63 and 64 in the statutory guidance.

We are also aware that some in industry have been working on an initiative to improve the level of consistency, transparency and disclosure around fee structures and the quality of performance reporting for private market assets. This initiative is to be applauded.

Thank you

As an aside, thank you to all master trusts that contributed to the market engagement exercise which collected investment data as at 31 December 2025. Your submissions provide valuable insight that will support our supervision activities in connection with our functions to monitor compliance with relevant legislation and duties. We appreciate the time and cooperation invested in this work.

Preparing for technology releases

With technology improvements and new software developments becoming more common in a digitalised world, trustees will need to consider how a technology release may impact a scheme. Here we share some best practice we have seen as part of our supervisory engagements. 

Testing:

Before rolling out new technology it is important that you have undertaken sufficient and robust testing, this will help ensure any issues can be identified sooner and before implementation. The following approaches should be considered: parallel run testing, phased roll out and pilot testing.

Contingency plans and mitigations:

It is important to ensure you have tested the roll back plans, have backup systems at the ready, agree clear escalations for decision making and go/no go decisions, understand the tolerances and triggers that could impact on “go/no-go” decisions so everyone is clear on what to do if something doesn’t quite go to plan.

Monitoring:

Increase monitoring of roll out, particularly on social media channels and customer support which offer live intel to help identify issues and errors sooner.

It is important that any software used to carry out data-related tasks is tested both at the point of implementation and on a regular basis after that. 

Significant event (a) trustee appointments

Through our engagement with master trust schemes we have become aware of some areas in which clarification of reporting requirements would be helpful during the process of trustee appointments.

We are reviewing our Significant events reporting policy and guidance more generally, but for now we’re clarifying Significant event (a) - trustee appointments. Regulation 14a of the Occupational Pension Schemes (Master Trust) Regulations 2018 requires schemes to submit a significant event form following a change or addition to the persons involved with the scheme in the capacities listed in section 7(2) or (3) of the Act (fit and proper requirement).

In the scenario in which a trustee is being re-appointed with no break in tenure, we would expect you to inform your TPR supervisor, however, we do not require a significant event form submission.

In the scenario in which there is a change of the Chair of Trustee, but it is an existing trustee being appointed as the Chair of Trustees, we would still expect you to submit a significant event notification to inform us of this change, detailing the skills and experience the individual holds to fulfill the role. The distinction here is that we will be assessing the fitness and propriety of the existing trustee against the specific requirements of a Chair of Trustee role.

Read further on Significant event duties for master trusts. 

Fraud monitoring and controls

We expect master trusts to have monitoring systems and controls in place as part of fraud prevention. From our supervisory engagement, we have seen that these systems vary in sophistication.

Tracking activity

It is good practice to have systems which ‘flag’ activity on a cumulative basis to identify sequences of actions which may be suspicious when viewed sequentially. For example, a change of contact details, use of the ‘forgotten password’ function followed by a withdrawal of funds. We encourage administrators and trustees to check whether their controls flag activity on a cumulative basis.

Points of entry

Points of entry and opportunities to prevent fraud include: change of contact details, ‘forgot your password’, telephone calls, fund withdrawal and authentication checks.

Change of contact details

Fraudsters commonly use changes to contact details as a method to facilitate fraudulent activity and have successfully done so within a master trust context. You should consider:

• Reviewing the authentication data required to make a change of contact details.
• Whether your system tracks actions following a change of contact details.

Carrying out regular member data quality exercises is part of good fraud risk management.

‘Forgot your password’

We also encourage you to review the controls in place surrounding any ‘forgot your password’ processes and consider whether the data required is appropriate, particularly where that process by-passes multi-factor authentication.

Telephone calls

Telephony interactions are another reoccurring point of entry for fraudsters attempting to access systems. It is good practice for customer support and others who handle calls to receive regular training on fraud identification and prevention. We encourage you to talk to your service providers about this.

Withdrawal of funds

When reviewing the actions which trigger risk flags, you should also consider whether the withdrawal fund amount is appropriate, bearing in mind pot sizes in your scheme.

Authentication checks

As you will likely be aware, the tools and methods used by bad actors are increasingly sophisticated and evolving particularly with the increased use of AI. We are aware of multiple fraudulent bank statements successfully passing manual checks carried out by master trust service providers. Again, we encourage you to engage with your service providers about their controls and the training in place to enable robust checks of documents.

In instances of identity theft, fraudsters may be able to provide a range of data points to be able to successfully pass authentication checks. You should:

• Review member communications and your identity authentication processes to identify weaknesses.
• Consider whether a single member communication such as an annual benefit statement would include the data required to pass authentication checks.
• Consider what other data (for example biometric data) could be requested which is not within written communication.

We urge you to report instances of fraud and speak to your supervisor so that we can continue to identify trends and share best practices on fraud prevention. For further information please see: Industry alert update: impersonation fraud.

Bank of England: Informing Private Markets Risk Management

The Bank of England has launched its second System‑Wide Exploratory Scenario (SWES), focusing on the UK private markets ecosystem.

The exercise aims to deepen understanding of how financial institutions active in private equity and credit would behave during a severe global downturn. It explores whether their collective actions could amplify stress across the financial system. The exercise reflects the significant growth of private markets over the past decade, and the potential for vulnerabilities in areas such as leverage, valuation uncertainty, data gaps and complex interconnectedness between market participants.

The SWES brings together alternative asset managers, large banks and institutional investors such as insurers and pension funds, which collectively represent around one‑third of UK PE buyout activity, half of UK and global private credit activity, and a substantial share of employment in PE‑backed corporates.

Implications for DC master trusts

DC master trusts are increasingly allocating to private markets for diversification and long‑term return generation. The SWES offers a valuable opportunity for master trusts to better understand market dynamics and potentially strengthen their risk management of private equity and credit investments.

The Bank of England expects to publish updates during 2026 and a final report early next year. TPR is supporting the Bank in this exercise and look forward to receiving their findings.

Transition Plan Working Group

Last year TPR convened an industry group to consider in more detail the practicalities and challenges of developing transition plans for occupational pension schemes. The group, called the Transition Plan Working Group, was formed in response to a request from DWP, with a view to informing thinking ahead of future consultation on transition plans.

The working group has now concluded its series of meetings and we will communicate more on this in due course.

Fighting pension fraud together

Watch our fighting pension fraud webinar

Thank you to everyone who joined our recent Pension Scams Action Group (PSAG) webinar, where more than 550 industry professionals came together to tackle the challenges facing our industry.

Alongside our PSAG members, we enjoyed contributions from Lord Hanson (Fraud Minister), Chris Bell (City of London Police) and Donna Walsh (Standard Life). Your questions and engagement provided valuable insight.

If you missed it, or want to revisit the discussion, you can now watch the full recording.

A new way to report fraud

One area highlighted during the PSAG webinar was the new Report Fraud service, which has now replaced Action Fraud.

The new service makes it quick and easy to submit reports and allows you to track the progress of your report, so you're kept in the loop throughout.
For master trusts, reporting anything that doesn't feel right is vital to protecting savers against scammers.

Every report allows authorities to build a bigger picture and can help block and disrupt crime in real time. Together, we can prevent pension fraud.

Climate Investing Framework – a useful tool for trustees

The Investment Consultants Sustainability Working Group (ICSWG) has published in December its Climate Investing Framework. The framework outlines how investors can support a sustainable transition, manage climate related risks, and drive real world outcomes through investment decisions and stewardship activities.

The framework provides guidance to asset owners and investors in:

• understanding climate related risks (physical and transition)
• engaging effectively with asset managers, companies, and policymakers
• allocating capital in ways that support both financial objectives and climate transition goals

It emphasises that real-world climate outcomes are necessary to mitigate systemic risks that could undermine long-term returns. The framework explains that investors should move beyond data collection to actions if they wish to influence real‑economy decarbonisation, including targeted engagement and transition‑focused capital allocation. It highlights that portfolio decarbonisation alone, such as shifting to low‑carbon assets, may reduce reported emissions but often has limited or even negative real‑world impact, especially if capital is withdrawn from regions or sectors that need to transition. Instead, “transition investing” and effective stewardship can drive meaningful change, particularly in hard‑to‑abate sectors and emerging markets where financing is essential for progress.

The framework also distinguishes between transition risks and physical risks. While physical risks are difficult to mitigate at a portfolio level, investment in climate adaptation and natural capital can strengthen resilience and support broader system level risk reduction.

Application to master trusts

The ICSWG brings together climate expertise across consulting firms, and this framework may be of use to support trustees in their consideration of long-term systemic risks, such as climate change. It provides key questions to assess exposures, asset alignment, stewardship effectiveness, and trade-offs between short-term performance and long-term climate outcomes. 

It supplements the group’s existing suite of tools and guidance developed to help schemes progress their climate strategies and reporting. These can be found on their website alongside consultation responses and sustainability research thought pieces.

FCA Regulatory Priorities Reports

This year the Financial Conduct Authority has started to introduce annual Regulatory Priorities reports to replace the portfolio / Dear CEO letters that they used to produce previously.

The reports are expected to provide a clearer, more consistent way of communicating their sector-specific priorities and to help firms understand:

• what they expect
• where they intend to focus / their key priorities for each sector
• what additional work they will be undertaking in the next year in that sector

The FCA’s Regulatory Priorities Report for Pensions was published on 10 March 2026 and is structured around four key priorities:

• Ensuring well-run schemes that provide value for money to savers.
• Encouraging effective support for consumers.
• Supporting growth and innovation.
• Modernising pensions & long-term savings.

The report also identifies (five) other areas of focus for this year. This includes for example, ‘supporting the delivery of government initiatives’, which relates to supporting the delivery of measures in the Pension Schemes Bill and the wider government reforms.

While the FCA’s primary focus relates to the £1.36trn contract based market, its priorities also intersect with the trustbased landscape. As part of our collective efforts across DWP, TPR and the FCA to deliver a consistent and aligned approach to regulating the DC market, several elements of this work will be directly relevant — and beneficial — to trustees.

Investing in nature – Investment 101

Published by the Department for Environment, Food & Rural Affairs (DEFRA) in January, the nature security assessment on Global biodiversity loss, ecosystem collapse and national security, sets out a notably severe set of findings including:

"Global ecosystem degradation and collapse threaten UK national security and prosperity….”

“…Every critical ecosystem is on a pathway to collapse”

“ ….Without significant increases in UK food system and supply chain resilience, it is unlikely the UK would be able to maintain food security ….”

Fortunately, the importance of nature and biodiversity was also the subject of some vibrant debate as part of the passage of the draft Pension Schemes Bill 2025 through the House of Lords. Although, ultimately, the proposed amendments were unsuccessful, the government response was both positive and practical. In particular, their response highlighted that they:

• "wanted to see more consistent and demonstrable progress ….in how schemes identify and manage nature-related financial risks and how they reflect issues such as deforestation, land use change and nature dependencies in their investment and stewardship strategies."
• expected “as international standards mature—especially for the International Sustainability Standards Board …— trustees to embed those considerations more fully into long-term decision-making.”

On the practical side, their response highlighted that:

• The International Sustainability Standards Board (ISSB) recently announced the beginning of nature-related standard setting, with the intention that these will become the global baseline.
  
• Introducing a UK-specific statutory duty ahead of those developments would risk locking schemes into a domestic framework that could quickly be superseded internationally.
• Their preferred approach was to sequence reforms so that pension disclosures plug into a consistent, interoperable flow of corporate information, rather than obliging trustees to build bespoke and potentially temporary architecture.
  
• In our view it is best practice for trustees to consider including examples of how schemes can:
  - identify, assess and manage biodiversity and broader nature-related risks
  - include consideration of supply chain deforestation, nature dependency mapping, data sources and stewardship escalation
  - treat nature-related impacts where they are financially material.
  

In a previous bulletin under Nature – an opportunity for action we set out some recommendations for trustees to consider to help improve their understanding of nature-related risks and opportunities. We are also aware that trustees on some schemes are actively taking action on nature and some MTs (or entities within their sponsor organisations) are investor participants of Nature Action 100. These are all positive developments but much more remains to be done.

 
We would also encourage trustees to keep any eye out for further developments in respect of future guidance for trustees on investment duties. Although, following defeat in the House of Lords, proposals for statutory guidance in this area are on hold, the government are clear that it plans to continue work in this area and are considering next steps.

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