View more on these topics

John Lawson: Insuring trust

Master-trust DC schemes are being caught up in a moral maze

Despite having discovered its moral compass over the past few years, the pensions industry is in danger of doing the wrong thing on a grand scale once again.

The ending of compulsory occupational pension scheme membership in the late 1980s, coupled with the introduction of personal pensions at the same time, set the stage for a pension misselling scandal which drags down customer trust to this day.

Insurers, and some advisers, put their own financial inter-ests ahead of their customers’. It is not a period of our history that we will recall with pride.

It takes a lot of “doing the right thing” to restore trust and the insurance industry has gradually woken up to the challenge. 

The ABI’s Open Market Option code, which has recently come into force, is a good example, although insurers are already miles ahead of trustees in ensuring they do the right thing by retiring customers.

Another recent example is enhanced transfer values. Although the pensions minister, the working group and Margaret Snowdon, who chaired that group, should take the credit for the Incentivised Transfer Exercises code, it only works for enhanced transfer values because the insurance industry wants it to.

Insurers all agreed to sign up to the code, rejecting ETVs that failed to comply with the stated principles.

There are many industry actors who would love to ignore the code and offer cash bungs attached to less than fair transfer values, but they cannot because insurers have refused to be involved. The insurance industry should be proud of what it has done here. There is still a lot to do but the tide has turned.

Not so master trusts. Aside from one or two, these new schemes are promoting the concept of “offsetting”, where employers encourage staff to take cash refunds when they leave within two years. The employer also gets a refund, which offsets their automatic enrolment contributions.

If their moral compass does not tell them this practice is wrong, they should at least listen to the pensions minister Steve Webb, who said: “Taking money out goes against our overall goal of getting millions more people saving.”

Automatic enrolment is a great opportunity to further restore customers’ trust in pensions. But we must do the right thing by enrolling them into pensions that are good value, governed properly, transparent and easy to grasp.

And we should understand that the whole point of automatic enrolment is to get people saving for retirement. As the DWP says, we must “ensure that money saved in a pension stays in a pension”.

Just because the rules do not forbid offsetting, that does not mean it is okay. There is nothing to stop people ignoring the ITE code but insurers have rightly chosen to say no.

To the master trusts that congratulate themselves on their resourcefulness in facil-itating offsetting – shame on you. You should have said no. 

Doubly disappointing is that some of these master trusts are run by insurers.

John Lawson is corporate benefits head of policy at Aviva



BoE extends Funding for Lending scheme by a year

The Bank of England has extended the Funding for Lending scheme by a year and the incentives offered have been “heavily skewed” towards lending to small and medium sized businesses. Banks and building societies will now be able to make drawdowns from the scheme, which was launched in August last year, until the end of […]

Govt could face big losses on Help to Buy, MPs warn

<!– <!– <!– <!– –> –> –> –> The Treasury select committee has slammed the Government’s Help to Buy mortgage indemnity guarantee, warning it could cause taxpayers significant losses and may not help first-time buyers or boost house building. The TSC’s Budget 2013 report, published last week, expressed concern that the Treasury will have an […]

MPs call for Lloyds and RBS ‘bad bank’

The Treasury select committee has called on the Government to investigate the pros and cons of breaking up Lloyds Banking Group and the Royal Bank of Scotland and to publish an analysis by June. In its Budget 2013 report, published last week, the TSC said it wants to see an analysis of whether a split […]


Aviva axes direct advice arm

Aviva is to stop offering face-to-face investment and protection advice for its customers from 31 May. The move, which comes as part of the 2,000 job cuts announced by the insurer last week, will affect approximately 120 advisers, most of whom are field-based. Around 10 adviser roles will be retained to look after existing customers. The announcement […]

2016 Global Survey of Individual Investors: How is investor behaviour rewriting the job description for financial professionals?

Trapped between expectations for near double-digit returns and strong apprehensions about investing in persistently volatile markets, investors worldwide are of the opinion that professional financial advice is worth the fee. But even though they believe individuals who work with a financial professional are more likely to achieve their goals, investors have a clear vision of […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm