Rules tightened on Master Trusts

Last month’s Queen’s Speech saw the government unveil plans for strict new rules on Master Trust pensions in a bid to address worries about their potential dangers.

Master Trusts emerged in response to the requirement for employers to meet the 2018 deadline for Auto-Enrolment. Each Master Trust is a single legal entity with a single board of trustees, but there are separate divisions within Master Trusts for each employer to make decisions on matters, including investment and service providers.

However there are fears that employees’ pensions would be at risk should any unregulated Master Trusts go bust. The Pensions Bill, announced in the Queen’s Speech will contain provisions to require Master Trusts to show that they meet strict new criteria, before they are able to enter the market and begin receiving funds from employers or members. The Bill will also contain provisions to give the Pensions Regulator greater powers to authorise and oversee Master Trusts and to act against them where needed.

In its recent report on Auto-Enrolment, the House of Commons Work and Pensions Committee expressed concerns about Master Trust regulation while they are being set up, once they are in the market and when failed Master Trusts are being wound up. The committee noted that the level of regulation is well below the level applied to contract-based providers.

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Link: Work and Pensions Select Committee