Work and Pensions Secretary Yvette Cooper says the Government has no plans to stop employers setting up occupational pension schemes which allow refunds of contributions.
At the Association of British Insurers’ savings, assets and protection conference in London last week, Cooper said the Government has no plans to make immediate changes to the legislation on these schemes, which may further encourage insurers to launch multi-employer trust-based products in the run-up to auto-enrolment.
Last month, Money Marketing revealed that Legal & General is gearing up to launch a master trust to capitalise on the expected flurry of employers towards occupational schemes.
Such schemes are expected to be more attractive than contract-based group personal pensions, particularly for employers with high staff turnover, because they allow refunds of contributions paid to employees who leave within two years. Occupational schemes are also outside the scope of the retail distribution review.
Speaking at the ABI conference, L&G wealth policy director Adrian Boulding asked Coo-per: “Are you concerned that some employers will be taking back the mandatory contributions they are required to make from people? Do you plan to do anything about that?”
Cooper said: “We are not proposing immediate changes to the legislation around pensions although we obviously keep everything under review and look at what the next phase of pension reform might be.”
Pensions minister Angela Eagle gave a similar answer when questioned by Standard Life earlier in the month.
Xafinity launched its master trust, Xafinity Pensions Trust, in August. Standard Life is planning to rejuvenate its existing product and Aegon and Aviva are keeping a watching brief.
Hargreaves Lansdown pensions analyst Laith Khalaf says: “This allows people to leave their employer of two years with absolutely zero in their pension fund. I do not think this is the Government’s main priority at the moment but it is so contrary to the impetus behind the reforms that I cannot fathom that it will be allowed to remain.”