Pensions minister Ros Altmann and The Pensions Regulator have warned MPs members’ savings held in master trusts are exposed by a lack of regulation.
At a Work and Pensions committee hearing today, Altmann said she was pushing for a Pensions Bill to add protections for master trust members but had not yet been given a date.
She said: “Currently there is no protection in master trusts which is why I am so exercised and we know doing nothing is not an option.”
She reiterated concerns, revealed last month by Money Marketing, over what happens to savings if a scheme is forced to close, and hinted a defined contribution equivalent to the Pension Protection Fund could be established.
She said: “The issue is the assets may well be protected by the FSCS or some other mechanism but the costs of wind-up for master trusts may have to come out of the assets of the trust. The members’ pensions may be impacted.
“One route is to give TPR more powers – potentially insurance, but it would not be a Government guarantee, we don’t have a guarantee for DB schemes either. The PPF has worked quite well and we have to do something [for DC].”
Earlier in the session TPR chief executive Lesley Titcombe admitted there was a “gap” in master trust regulation that left savers exposed.
She said: “We have been concerned that we are not able to exercise as strong a regulation on this group given their importance. We introduced the master trust assurance framework with the Institute of Chartered Accountants as a way of trying to help employers choose a scheme.”
Responding to a question on whether having the framework as voluntary left a gap in terms of consumer protection, Altmann said: “In my view yes it does. We are in talks with the Government over a range of possible solutions, including making the framework mandatory.”
Committee member and South Thanet Conservative MP Craig Mackinlay says: “I do worry that in 15 years’ time we’ll be sitting here dealing with the master trust mismanagement action group if we are not careful. That’s why I’m glad we’ve got the opportunity to nip this in the bud early.”
Salvus Master Trust managing director Graham Peacock says: “It is important to note that while there are rightly concerns around a small number of master trusts, which might not be sustainable over the long term, the vast majority are run according to stringent governance and capital requirements.
“The high cost of set up and need for independent trustees means that master trusts by necessity have a strong commitment to market over the long term. We are therefore confident most of these will be able to deliver good returns to their members.”