The Pensions Regulator (TPR) has warned there are real risks from new master trusts being subject to far less regulatory scrutiny than new contract-based providers in auto-enrolment pension schemes.
The watchdog gave the caution as its latest defined contribution statistics showed the number of members in master trusts has risen to 3.9 million - 80% of the total 4.7 million in automatic enrolment schemes.
TPR's seventh annual statistics report on DC occupational pension schemes is based on data covering around 35,000 private pension schemes as of 31 December 2015.
TPR executive director for regulatory policy Andrew Warwick Thompson said in a statement today: "This poses some risk associated with regulatory arbitrage, with new master trusts being subject to far less regulatory scrutiny than new contract-based providers.
"We are working closely with the Department for Work and Pensions to ensure adequate member protections are in place within master trusts."
The revelation follows concerns that some recently introduced master trusts are not properly regulated. The Pensions Policy Institute warned last October about TPR's lack of power to discipline them.
Last July, the regulator published a list of providers that were willing to take on small employers and met the voluntary master trust assurance framework (MAF), leading to talk that it was turning the screws on sub scale providers.
Just seven master trusts have been validated under the MAF, out of more than 80 providers. There have been calls to make the assurance framework mandatory.
