MPs on the work and pensions select committee have called for an overhaul of regulation governing auto-enrolment master trusts, highlighting “major concerns” over where such schemes are investing their members’ funds.
In a report released yesterday (15 May), the committee requested a pensions bill be included in Wednesday’s (18 May) Queen’s Speech to address the “risk from weaknesses in pension regulation”.
The report raised specific concerns about multi-employer occupational schemes where each employer has its own division within the arrangement, known as master trusts.
Gaps in current rules have allowed “potentially unstable” master trusts onto the market, the report stated, with employers unwittingly putting their scheme members at risk of losing their retirement savings.
The committee also expressed concern the incoming Lifetime Isa could “distract from auto-enrolment, with employees potentially opting out of their workplace scheme to put savings into a Lisa.”
Committee chairman Frank Field MP put governance and investment oversight at the top of the list of regulatory priorities.
“Auto-enrolment has been a tremendous success that will ultimately see approximately nine million people newly saving, or saving more, in a pension,” he said.
“Crucially now we must do much more to ensure people’s savings are put in the best possible place, and are secure. To this end, we greatly look forward to seeing a Pension Bill in the Queen’s Speech this week. This is what we and others have been calling for.”
Now we must do much more to ensure people’s savings are put in the best possible place and are secure. Frank FieldThe committee also said the government should improve its communication with businesses trying to put pension schemes in place.
It called on the Department of Work & Pensions (DWP) to explain to small businesses where liability will fall if their chosen scheme performs badly or fails.
It also recommended the DWP engage with HM Revenue & Customs to expand basic PAYE tools to cover AE. “It must be as easy as possible for small businesses to participate without additional cost,” it said.
Minesh Patel, business adviser and director of EA Financial Solutions, agreed the auto-enrolment industry needs much stronger regulation.
He said the ease with which anyone can set up a master trust was “a bit of a joke”.
“How can it be appropriate that anybody can go and set up a master trust? There should be a tendering process and rigorous due diligence.
“Auto-enrolment is a good thing, but we don’t want to see the kind of scandals that we’ve seen with final salary pensions,” he said.
The Department of Work & Pensions declined to comment on whether a pensions bill will be included in the Queen’s Speech.
james.fernyhough@ft.com
