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Regulators in threat to block master trusts

The FSA and The Pensions Regulator have threatened to write new rules preventing a rush to master trusts to dodge retail distribution review requirements.

The two regulators have asked the Association of British Insurers to provide details about master trusts in a bid to “prevent regulatory action”.

In a letter to member firms, ABI savings and retirement assistant director Yvonne Braun says: “Both the FSA and TPR have expressed concerns about recent articles in the trade press which suggest that one of the reasons for adopting a master trust model could be that, as an
occupational scheme, it would be outside the scope of the RDR.

“The FSA sees this as a subversion of the RDR reforms and have said they might write rules to prevent this. TPR will cover master trusts in their project on defined-contribution risks.”

Braun’s letter cites a Money Marketing article in which providers predict an explosion of master trust launches as occupational schemes are not subject to the RDR and allow refunds of contributions. But at an ABI conference in October, Work and Pensions Secretary Yvette Cooper said the Government had no plans to clamp down on master trusts.

An FSA spokesman says: “If we found firms were purposely trying to get around our requirements, we would be very concerned.”

An ABI spokesman says: “There is an uneven regulatory playing field between occupational pensions and contract-based workplace schemes.

his arbitrage risks extensive switching from group personal pensions to master trusts, which we believe is wholly unconstructive.”

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