Govt eyes master-trusts clampdown amid auto-enrol fraud concerns

Ros Altmann

The Government is eyeing a clampdown on trust-based pension schemes amid concerns lax rules around setting up master-trusts and poor controls on withdrawals are leaving auto-enrolled employees vulnerable to fraudsters.

The trust-based auto-enrolment market is dominated by Nest, The People’s Pension and Now: Pensions but estimates put the range of registered master-trusts between 70 and 100. Experts says low barriers to entry and a DWP loophole are putting employers and members at risk.

Pension Playpen director Henry Tapper says: “I’ve reported a number of master trusts. It’s a simple fraud.You tell employers the charge is 0.75 per cent, you then empty the money out of the back using the loopholes in the DWP legislation which allow money to be taken out of the  net asset value of a fund as you see fit.

“That’s what has happened, is happening and will continue to happen until the DWP close the loophole.”

Pensions minister Ros Altmann says: “I am aware of the potential issues with the quality and sustainability of some new master-trusts. Doing nothing about this isn’t an option. The Government is looking carefully at this issue and exploring the best options to tackle it for consumers.”

Pensions Policy Institute director Chris Curry adds the FCA’s oversight of contract-based schemes is far tighter than The Pensions Regulator’s rules: “The trust-based regime is set up to work incredibly well with professional, large schemes but at the moment it is open to people who are less qualified and there’s a risk not everyone will do it as well.”