The Work and Pensions select committee is urging the Government to help employers set up “governance committees” for contract-based pension schemes in response to concerns about a lack of protection for members.
A report published by the committee last week warns savers in contract-based schemes may lose out as a result of poor governance.
It argues the trustee in a trust-based scheme provides a level of oversight for members which is not offered to savers in contract-based schemes.
The report says: “There are inherent weaknesses in the mechanisms for governing contract-based schemes which the Government and regulators must address, to ensure that members of contract-based schemes are offered the same level of protection from detriment as members of trust-based schemes.
“We recommend the Government and the regulators investigate ways of assisting all employers who offer contract-based schemes to set up governance committees to oversee their pension scheme and that particular attention should be given to supporting small and medium enterprises to do so.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “In theory trustees should provide extra protection for members but the reality is a lot of trustees are not particularly active.”