Providers back greater scrutiny of master trusts

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Providers say master trusts set up for auto-enrolment should come under greater regulatory control over fears low barriers to entry are putting members’ savings at risk.

Yesterday the Treasury revealed it is planning to boost supervision of trust-based schemes but would not yet produce a ‘whitelist’ of approved providers.

It said master trusts – multi-employer schemes designed for auto-enrolment – were particularly in scope.

Providers of contract-based schemes, regulated by the FCA rather than The Pensions Regulator, welcomed signs the Government is preparing to tighten controls.

Aegon regulatory strategy director Steven Cameron says: “You can categorise master trusts into those run by FCA regulated entities and the others.

“The first group already have the benefit of the sorts of supervision and controls the FCA brings so the area that might need further review are those not associated with FCA and PRA-regulated entities.

“We should be looking at conduct and solvency – if you are investing in a pension you want the provider to be there in 30 years time.”

The Pensions Regulator encourages master trusts to commit to an independent assurance framework but only a few providers have signed up.

Standard Life head of pensions strategy Jamie Jenkins suggests extending the standards.

He says: “One idea that has been put forward which is worth considering is some sort of audit assurance framework for non-FCA regulated master trust providers.

“If you are regulated by the FCA then that’s fine because you have a huge level of regulation to adhere to, but if you’re not then there’s a gap, so should you have a mandatory independent audit assurance framework to fill that gap?”

The move came as part of the Treasury’s response to a consultation on barriers to people accessing the pension freedoms, including exit fees and pension transfers.

Altus director Ben Cocks says the industry needs clearer direction.

He says: “I think they’ve misunderstood some of the detail. They’ve failed to grasp the nettle on many of the key issues, areas like a white list are a bit underwhelming. There aren’t many concrete measures.

“Defining a service level agreement for transfers would good, in Isa world we have that across the industry. I was hoping for a clearer steer on what providers can expect and a sterner word for the industry.”