Savers currently face two main risks:
• It is too easy to set up a master trust and there is insufficient control over the quality and sustainability of schemes; and
• Savers may lose money if a master trust fails as their funds could potentially be used to pay for the wind-up of the scheme.
The PLSA and its members made proposals to Government earlier this year on the regulatory changes needed to protect consumers who are saving in master trusts.
Joanne Segars, Chief Executive, Pensions and Lifetime Savings Association, said: “Master trusts underpin the success of automatic enrolment which has seen millions of new savers join workplace pensions. Master trusts provide the considerable benefits of scale, institutional pricing and high quality governance which would otherwise be unavailable to these savers.
“We believe tighter regulation of master trusts is essential to protect savers and ensure that only good master trusts operate in the market - so we welcome the Pension Bill. It seeks to address the main issues we raised with Government earlier this year. The PLSA will closely examine the Bill, and engage with Government on the planned secondary legislation, to ensure that it is proportionate. The capital reserving and financial sustainability provisions will require particular scrutiny.
“Public confidence in automatic enrolment has been hard-won and we must retain it – stricter regulation of master trusts will help achieve this.”
Jamie Fiveash, Board member, Pensions and Lifetime Savings Association, said: "This is an important Bill that will provide the appropriate safeguards for the millions of people now saving for their retirement through master trusts. Like any piece of Government legislation it will need detailed scrutiny to ensure it works as intended, but we expect the Bill to raise standards and be a driving force in making sure savers are in better value pensions."
The conditions of market entry proposed by the PLSA in early 2016
• The master trust should be able to exit the market without using scheme members’ funds.
• Trustees and senior executives should be able to show they have the necessary skills and are fit and proper persons to hold their position.
• The master trust should have a discontinuation plan, audited by the Pensions Regulator.
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