With over 6million people now saving for their pension, the Work and Pensions Select Committee have hailed auto enrolment as a
‘tremendous success’. However their report also says gaps in pension regulation have allowed potentially unstable master trusts onto the market. Therefore the question is:
Are employers unwittingly putting their scheme members at risk of losing their retirement pot?
The committee also raised concerns as to whether there is enough clarity about employers’ liability if one of these master trusts were to collapse, or if any chosen pension fund fails. Currently there are over 70 registered master trusts that are in operation, the committees report said it had heard evidence of ‘various concerns that TPR’s regulatory powers with regards to master trusts are insufficiently robust.’
The Association of British Insurers (ABI) gave evidence of ‘lower standards for the specificity of risk warnings and the provision of communications to members for trust-based schemes’ and
The Pension Regulator (TPR) acknowledged that some of the smaller master trusts ‘may not be run by competent people.’
To conclude, an executive director at TPR acknowledged that there was a risk of some of the schemes collapsing – and therefore members could be at risk of losing their savings.
A master trust assurance (MTA) framework, developed with ICAEW, is reported to be working well in directing employers to those schemes, which demonstrate adequate standards of governance and administration, although the number of master trusts to sign up is yet to reach double figures.
HMRC’s decision not to develop the HMRC basic PAYE tools (BPT) to support auto enrolment was also criticised. Their report calls for DWP to work with HMRC to expand BPT to support small businesses in meeting their automatic enrolment obligations, ensuring that additional costs are reduced for the smaller employers.
To find out more information, click through to the
report.