Yet more pension tinkering is on the way with a new bill aimed at safeguarding workers who have retirement savings stuck in risky master trusts.
Millions of workers are saving into pensions run by a master trust, which manage a central fund for several employers at the same time.
Master trusts have sprung up in response to a need for pension managers triggered by auto-enrolment in the workplace.
However, MPs and regulators have expressed concerns that gaps in existing laws allow unregulated trusts to control millions of pounds of pension cash.
Their fear is that a master trust could go bust depriving workers of huge amounts of retirement savings.
Queen announces new Pensions Bill
In the Queen’s Speech in Westminster, the government outlined new measures aimed at tightening the rule for master trusts.
The details she unveiled include a stricter registration process that sets tests that must be passed before the master trust can start trading or accept money.
The Pensions Regulator will also have upgraded powers to supervise master trusts.
MPS on the Work and Pensions Select Committee first raised concerns about master trusts.
The worries came to light when they were assessing how the government’s auto-enrolment program for workplace pensions was progressing.
They realised that master trusts were rushing to market to grab a slice of the 6.1 million accounts that were created and saw they were operating in an unregulated market.
Fears millions may be lost
The committee urged the government to act because some small trusts were not run by competent managers and that current laws do not stop a failed master trust from winding up with the loss of millions of pounds in pension savings.
“This new bill has come about from concerns within the government about master trusts,” said Leslie Titcomb, CEO of The Pensions Regulator.
“Master trusts need to meet stricter registration requirements and closer supervision from regulators. The new powers will help us to do this job.”
Close to 70 master trusts have been set up to manage and invest cash from thousands of employers under auto-enrolment. Nine have master trust assurance from the regulator.
“The concern was these trusts have much laxer controls than other providers,” said Kate Smith, head of pensions at Aegon UK, one of the country’s biggest financial firms.”