Bill to improve protections for pension savers

Updated

A new Pensions Bill promises to bolster protections for those saving for their retirement and remove barriers for people who want to access their savings flexibly.

The Bill tackles concerns raised about "master trust" pension schemes, as automatic enrolment into workplace pensions continues to roll out.

More than six million people have been placed into a workplace pension under auto-enrolment and eventually the drive will mean around 10 million are newly saving into a pension or saving more.

The Commons Work and Pensions Committee recently raised concerns about master trusts, which provide occupational pension schemes for multiple employers who are otherwise unconnected.

The Pensions Regulator initially encouraged employers to enter such schemes as they were considered to be best placed to meet the standards necessary for "good outcomes" for savers.

But in evidence to the committee, the regulator expressed concern that it was not able to exercise stronger regulation over the trusts and some of the smaller ones "may not be run by competent people".

Pensions minister Baroness Altmann also told the committee she shared concerns over master trusts.

The new Bill promises to provide better protections for members of master trust pension schemes, including millions of automatically enrolled savers.

Master trusts will need to demonstrate that schemes meet strict new criteria before entering the market and taking money from employers or members. The Pensions Regulator will be handed greater powers to authorise and supervise the schemes and step in when necessary.

Meanwhile, early exit fees charged by trust-based occupational pension schemes will be capped and a system will enable consumers to access pension freedoms without "unreasonable barriers".

Introduced last year, the pension freedoms give people aged 55 and over a wider range of choices over how they take their pension pot, rather than having to buy a retirement income called an annuity. But some people found that after the freedoms started, they could not access their pot in the way they wanted to.

As of January this year, nearly 400,000 pension pots had been accessed flexibly under the new freedoms, with many customers getting a range of options. But data collected by the Financial Conduct Authority (FCA) showed that nearly 700,000 (16%) customers in contract-based schemes who are able to flexibly access their pension could face some sort of early exit charge.

The Government also plans to restructure the financial guidance available to consumers. A new guidance body will be created, bringing together the Pensions Advisory Service, Pension Wise and the pensions service offered by the Money Advice Service (MAS).

The MAS will be replaced by a new money guidance body, which will identify gaps in the financial guidance market to make sure people can access high-quality debt and money guidance.

            Brexit battle: Iain Duncan Smith claims EU promotes 'social injustice'
Brexit battle: Iain Duncan Smith claims EU promotes 'social injustice'

Advertisement