Pensions  

Aegon hits back at government master trust rules

Aegon hits back at government master trust rules

Aegon has said life companies should not be forced to comply with some of the rules in the government's new Pensions Bill, arguing they would weaken rather than strengthen member protections.

The Pensions Bill introduces a number of major reforms to multi-employer master trusts providing workplace pensions, mainly through auto-enrolment.

These rules include governance and capital adequacy standards, and a requirement for all master trusts to have a "scheme funder".

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It was the latter requirement  Aegon objected to.

According to the bill, the scheme funder must be a separate legal entity that only carries out activities relating directly to the master trust. That means it cannot be a diversified business like a life company.

Aegon head of pensions Kate Smith said pension providers regulated by the Financial Conduct Authority and the Prudential Regulation Authority were already required to underwrite the cost of running the scheme.

She said forcing them to create a new entity to do a job that was already being done could weaken member protection by moving them out of the FCA and PRA regulatory regime.

"Where a master trust is run by a provider subject to FCA and PRA rules, members benefit from tough regulations, including robust capital adequacy standards," Ms Smith said. 

"The ‘scheme funder’ proposals will force regulated providers to set up separate legal ‘scheme funder’ entities for their master trusts, potentially moving members out of the protection of FCA/PRA regulations." 

She said a "far more sensible" approach would be to exempt FCA/PRA regulated firms from the new scheme funder proposals.

She said The Pensions Regulator could then work with FCA and PRA to "make sure master trust members are appropriately protected".

"For master trusts already offered by financially sound firms, the separate ‘scheme funder’ requirement is a sledgehammer to crack a nut,” she said.

Allan Maxwell, a business adviser and director of Corporate Benefits Consulting, said ideally there should be one set of rules governing one area.

"I can understand the life companies' position, but you've got to put the client's needs first. If the provider has to do a little bit more work, then tough," he said.

Mr Maxwell said he had no particular preference for one regulator over the other, saying they were all rigorous.

"I certainly would not say abiding by TPR rules is any less onerous than abiding by the FCA rules," he said.

He added that TPR-regulated master trusts such as Nest were better for clients with few employees on lower wages; while FCA-regulated providers were best for bigger, more "paternalistic" employers, particularly those wanting to provide their employees with ongoing advice.

james.fernyhough@ft.com