The government has announced plans to strengthen pension trustee competency requirements, tighten master trust regulations and introduce mandatory minimum standards for administrators, as the industry prepares for the emergence of megafunds.

The proposals aim to ensure governance and regulatory oversight keep pace with the consolidation of pension schemes into larger arrangements managing 10s of billions of pounds in retirement savings.

As part of the reforms, the government will work with The Pensions Regulator (TPR) and industry to develop a new trustee competency framework that sets out the skills and knowledge needed to oversee increasingly complex pension schemes.

The framework will cover emerging areas such as artificial intelligence (AI), cyber security and the governance of large-scale pension arrangements, giving trustees a clearer benchmark to assess and develop their capabilities.

The government also plans to strengthen the master trust authorisation and supervisory regime, allowing TPR to intervene earlier where risks to members' savings emerge.

Under the proposed changes, TPR could act before a breach of master trust authorisation criteria occurs, rather than waiting until the criteria have already been breached.

The reforms are intended to future-proof the regulatory framework as master trusts, which have expanded significantly alongside automatic enrolment, are expected to account for much of the emerging megafund market.

Alongside the changes, the government will work with TPR to better understand the professional trustee market and develop governance arrangements that strengthen trustee independence, manage conflicts of interest and improve member representation.

Pension administration will also face greater regulatory oversight, with administration providers required to register with TPR and meet mandatory minimum standards focused on data quality.

The government argued that reliable administration was essential to effective trustee decision-making, with accurate records, timely communications and correct benefit payments underpinning saver confidence in the pensions system.

Pensions Minister, Torsten Bell, described the changes as "necessary" to ensure that governance and administration standards kept pace with the growing scale of pension schemes.

"Bigger pension schemes will help deliver better outcomes for savers," he continued.

"Our approach to overseeing and administering such large pension schemes needs to keep pace with a fast-evolving pensions system. Members must be able to trust the people and systems managing their money.

"Thanks to the industry's engagement, we can act now. Behind every pension pot is a person planning their future, and we want them to feel confident it is in safe hands."

Pensions Management Institute (PMI) chief strategy officer, Helen Forrest Hall, added: "We welcome the government's continued commitment to strengthening governance across the pensions sector through stronger master trust authorisation and a practical framework of new minimum standards for administration.

"Pensions are getting bigger, more complex and more important than ever. These reforms are a chance to raise standards, strengthen governance and make sure millions of savers get the outcomes they deserve."

Meanwhile, Pensions UK chief policy officer, Zoe Alexander, stressed that trustee boards would need to adapt to the growing responsibilities associated with overseeing megafunds.

"The pension landscape is changing, and trustee boards need to evolve to reflect that," she warned.

"Trustees of megafunds need the right support and member input to govern schemes of growing and systemic economic significance."

Alexander also welcomed the government's focus on raising standards without introducing unnecessarily prescriptive requirements.

"The pensions industry recognises where change is needed, and we welcome the government's focus on collective board capability, stronger administration and raising standards without unnecessary prescription," she noted.

The government confirmed it would take the reforms forward at the next legislative opportunity, with implementation phased and proportionate to give the pensions industry time to prepare.

---