Govt hands TPR new powers in master trust clampdown

Queen reading her speech 2014

The Government is acting to protect millions of auto-enrolment savers through new standards for master trusts and greater powers for the Pensions Regulator.

Following today’s Queen’s Speech, the Government unveiled a Pensions Bill that will add new protections and extend a cap on pension exit fees.

The accompanying document reveals master trusts – which includes Nest, The People’s Pension and Now: Pension – will have to meet “strict new criteria”.

In addition, TPR is to be given a boost with extra controls to “authorise and supervise these schemes and take action when necessary”.

In February Money Marketing revealed pensions minister Ros Altmann’s concern that savers were at risk as a result of the weak rules governing master trusts.

The Treasury has already tasked the FCA with introduce a cap on early exit penalties for contract-based products, and as expected, this work will be mirrored for trust-based schemes.

The Bill will also “create a system that enables consumers to access pension freedoms without unreasonable barriers”, the Government says. No further detail is given.

As previously announced, the Pensions Advisory Service, Pension Wise and some services offered by the Money Advice Service will be merged into a single pensions guidance body.

Royal London director of policy Steve Webb says: “This is a very disappointing Bill. Whilst measures to improve the regulation of workplace pensions and reorganise financial guidance are welcome, the elephant in the room is the under-saving crisis in the UK, and this Bill will do little to address that problem.

“The DWP’s own figures show that more than 12 million people are not saving enough for their retirement and this Bill will barely scratch the surface of that problem. Urgent action is needed to get employees saving more than the statutory minimum of 8 per cent of their pay, and also to get more than two million self-employed people into pension saving for the first time.

“Regulators also need new powers to protect people’s pensions when corporate transactions leave workplace pension rights at risk. Unless new powers are added to the Bill during its passage through Parliament it will simply fail to address the big issues in pensions.”

Scottish Widows head of industry development Peter Glancy says: “Scottish Widows has long been concerned about the regulatory frailty around the more dubious Master Trusts which have clearly been established with a profit motive. We believe all firms operating on a commercial basis should be subject to both prudential and conduct oversight.

“New entrants must be subject to assessment before gaining authorisation to become a custodian of customer assets and existing operators should be given a sensible period of time to demonstrate the necessary level of competency.”