Advisers recommending poor-quality pension schemes could be “the next major scandal”.
In recent weeks The Pensions Regulator has raised the alarm over the ease with which master trusts can be set up and the lack of regulatory oversight compared to contract-based arrangements.
Additionally, the Department for Work and Pensions has banned commission payments to advisers – worth over £1m a year – for all auto-enrolment qualifying schemes.
Wessex Pensions is a master trust run by advisers. Its website and member booklet contain factual errors, including overlooking how contributions are based on banded earnings and how low earners will miss out on tax relief because the scheme uses a net pay arrangement.
Members are charged 0.72 per cent in annual management fees plus £3 per member per year. On set-up there is a £750 one-off charge, reduced to £500 for businesses with 10 or fewer employees, and there is a monthly administration charge of £50.
Rowley Turton director Scott Gallacher says: “I struggle to see how recommending a scheme like this can be best advice for any member or employer. We are talking about a relatively untested scheme, no track record and questionable financial strength. This is a cottage industry at best. Why would you select it over a scheme like The People’s Pension or Royal London or whoever? I can’t see any reason to pick a scheme like this; I can only see this as an additional way for advisers to get paid.”
He warns: “It’s not just this scheme; potentially we have the next major scandal.”
Wessex Pensions declined to comment.