New pension regulations for master trusts launched
The Government has published the new Pension Schemes Bill, outlining new pension regulations for master trusts and strengthening existing legislation on exit charges.
There are some members who the Government fears have savings that are at risk, due to minimum governance standards of master trusts not being met. The new Bill intends higher criteria to be set out and thus strengthen new trusts as well as existing ones. Through creation of a new approval procedure for master trusts as well as awarding new powers to The Pensions Regulator to intervene where schemes may be at risk of failing, the new Bill aims to raise consumer protection levels on numerous pension issues.
The following new criteria for master trust schemes will also need to be demonstrated:
- Persons involved in the scheme are fit and proper
- The scheme is financially sustainable
- The scheme funder meets certain requirements in order to provide assurance about their financial situation
- Requirements for systems and processes, in relation to the governance and administration of the scheme being sufficient
- The scheme has an adequate strategy to retain continuity in place
In regards to current charge legislation, the new Bill also intends on making a change for occupational pension scheme members wishing to access their pension savings. Through helping to implement a cap to stop early exit charges, members are not faced with yet another barrier.
Commenting on the new Bill’s benefits was Richard Harrington. The Minister for Pensions 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.”
Similarly highlighting the increased level of protection the bill aims to bring was The Chief Executive of The Pensions Regulator, Lesley Titcomb: “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.”
Head of Pensions at Aegon also commented on the new Bill bringing master trust standards in line with regulatory ones. Kate Smith mentioned the benefits that this would bring to the pension industry in general: “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.”