"The Pension Scheme Bill will drive up standards and give us tough new supervisory powers to authorise and de-authorise master trusts according to strict criteria"
The government believes that there could be some members whose savings are at risk from master trusts which don’t meet minimum governance standards. The Bill will strengthen schemes by requiring them to meet higher operating criteria.
The Bill will also help boost consumer protection on a range of pension issues, including creating a new approval regime for master trusts and giving new powers to The Pensions Regulator to intervene where schemes are at risk of failing.
Master trust schemes will be required to demonstrate that they meet five key criteria:
- persons involved in the scheme are fit and proper
- that the scheme is financially sustainable
- that the scheme funder meets certain requirements in order to provide assurance about their financial situation
- systems and processes requirements, relating to the governance and administration of the scheme are sufficient
- that the scheme has an adequate continuity strategy
The Bill will also makea change in relation to the existing legislation on charges, helping to introduce a cap to prevent early exit charges from creating a barrier for members of occupational pension schemes wanting to access their pension savings.
The Minister for Pensions, Richard Harrington, said: "We are helping to create a culture of saving across the country and have delivered much needed change to our pension system to make saving easier, fairer and safer for all.
"We want to make sure that people saving into master trusts enjoy the same protection as everyone else, which is why we are levelling-up that protection, to give these savers more confidence in their pension schemes."
The Chief Executive of The Pensions Regulator, Lesley Titcomb, added: "We are very pleased that the Pension Scheme Bill will drive up standards and give us tough new supervisory powers to authorise and de-authorise master trusts according to strict criteria, ensuring members are better protected and ultimately receive the benefits they expect."
Kate Smith, head of pensions at Aegon, commented: “We welcome the raft of measures set out in the Pensions Bill designed to bring the governance standards of all master trusts up to a consistent level, giving greater protection to members’ savings. These measures, supported by new authorisation and intervention powers for the Pensions Regulator, will bring governance standards of master trusts much closer to contract-based regulatory standards which has to be good, not only for those employees saving in a master trust, but for the pension industry as a whole.
“In future those setting up master trusts will need to prove they meet these standards, and existing master trusts will also need to comply with the new rules. This should give comfort to members that their pension savings will be protected including if their master trust winds up.
“With reportedly around 100 master trusts, not all will be able to achieve the size they need to succeed, and some may decide the additional costs created by these standards are too great. This may drive consolidation in the coming year, with members being transferred into stronger schemes which meet the new standards.”
