As measures from the new pensions bill take hold – including reforms to the rules governing master trusts and new guidance options for employers and employees – experts give their views on the changing landscape
Among the pledges in this year’s Queen’s Speech – including job creation, a digital economy bill, and an education for all bill – was, above all, the promise of “security for working people”.
Part of this is, of course, the new pensions bill, the main benefits of which include: better protections for ‘master trust’ pension scheme members, including automatically enrolled savers; the capping of early exit charges levied by trust-based occupational pension schemes; and a new UK-wide money guidance body, providing access to a straightforward yet high-quality private pensions guidance service.
“Greater regulation of master trusts is an absolute necessity,” says Chris Noon, partner at independent pensions consultancy advisors Hymans Robertson, commenting on the fact that master trusts – that is, multi-employer pension schemes, often provided by external organisations – will now have to face some stringent standards before taking money from employers or members.
While the master trust market has grown rapidly – a consequence of millions more workers being automatically enrolled into pension schemes (around six million people since 2012) – barriers to entry have been low, says Noon.
“Consumers haven’t received the same safety nets as they would get if they were with an insurer… Forcing master trusts to meet strict new criteria before entering the market is absolutely the right thing to do, as is giving the regulator more power to improve protection.”
Meanwhile, the cap on pension exit penalties is a good thing, according to Tom McPhail, head of retirement policy at financial service company Hargreaves Lansdown. “They have no place in the pension freedom world,” he says.
While the new pensions guidance service, bringing together the combined forces of the Pensions Advisory Service, Pension Wise and the pensions services offered by the Money Advice Service, “is a welcome opportunity to rethink how free guidance can best serve consumers,” he said.
Pete Glancy, Head of Industry Development at Scottish Widows also welcomes the changes:
“Ease of switching is an important function within a market that works well for consumers. We welcome this announcement, having already announced plans to remove exit penalties in their entirety from our workplace pensions.
“We’ve also been concerned for some time that the frailty of the regulatory framework around master trusts represented a considerable risk to customers. It is important that all propositions are subject to robust prudential and conduct oversight.”