Stronger protections proposed for pension savers

Pension savers' money will get stronger protections under the Government's plans to hand a regulator tough new powers.

The measures in the Pension Schemes Bill follow concerns that some people's savings could be at risk from master trusts. The Bill will require master trusts to meet stricter operating rules.

In May, the Commons Work and Pensions Committee expressed concern about the development of ''potentially unstable'' master trusts, which provide occupational pension schemes for multiple employers who are otherwise unconnected.

The committee warned that if one of these trusts collapsed, there is a risk that faith in automatic enrolment into workplace pensions could be undermined.

Around 10 million people are eventually expected to be newly saving into a pension or saving more due to the landmark scheme to automatically place people into workplace pensions.

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

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

The Bill will create a new approval regime for master trusts and give new powers to the Pensions Regulator to step in where schemes are at risk of failing.

The Government said master trusts can offer great value for members and employers due to their scale.

Pensions Minister Richard Harrington said: "We want to make sure that people saving into master trusts enjoy the same protection as everyone else, which is why we are levelling-up that protection, to give these savers more confidence in their pension schemes."

Lesley Titcomb, chief executive of the Pensions Regulator, said: "We are very pleased that the Pension Scheme Bill will drive up standards and give us tough new supervisory powers."

Nathan Long, senior pension analyst at Hargreaves Lansdown, said: "This is the death knell for badly-run master trusts."

He continued: "Many current members will not have chosen membership, having been enrolled automatically by their employer.

"There is a group of very well-run master trust schemes for whom compliance will be little more than a formality. However, there are those for whom this extra regulation will expose their shortcomings."

Kate Smith, head of pensions at Aegon, said: "With reportedly around 100 master trusts, not all will be able to achieve the size they need to succeed, and some may decide the additional costs created by these standards are too great.

"This may drive consolidation in the coming year, with members being transferred into stronger schemes which meet the new standards."