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Pensions regulator investigates master-trust conflicts of interest

The Pensions Regulator is investigating potential conflicts of interest in defined-contribution master-trust schemes set up by insurance companies.

Speaking at a fringe event at the National Association of Pension Funds conference in Liverpool last week, TPR practice manager Darran Burton said the regulator is scrutinising potential conflicts of interest for trustees of master-trusts who are appointed and paid by the provider which set up the scheme.

He said: “Recently, we have seen conflicts emerge with commercial providers of master-trusts. The trustees are put in place by the provider and often they are paid employees of the provider.

“It is very hard to understand how and when they are acting as agents of the provider and when they are acting in the best interests of the member.

“We have even seen some arrangements where, in our view, the scheme rules prevent the trustees from acting in the best interests of members because their powers are fettered and they can’t change the administrator or the investment manager because it is a tied arrangement with the provider.

“This is an area we are paying a lot of attention at the moment. Conflicts is a big issue for us.”

B&CE director of customer solutions Jamie Fiveash said: “It is clear that these conflicts are going to exist in this space, so the key is to make sure they are managed properly.

“Our parent has sponsored a trustee firm to run ‘The People’s Pension’, so there is a potential conflict there. But it is less of an issue for us because we do not have pressure from shareholders.”

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  1. If the basis of the protection within a Trust is an independent set of Trustees who have the freedom to make decisions then mastertrusts are flawed

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