PensionsNov 20 2017

Pension schemes unhappy with 'rushed' new rules

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Pension schemes unhappy with 'rushed' new rules

Salvus Master Trust has hit back at the government’s time frame for consultation on the new master trust regulations, saying it is too short to be effective.

A master trust is a multi-employer occupational scheme where each employer has its own division within the master arrangement. They have become a popular solution for employers seeking to fulfill their auto-enrolment obligations.

However after something of a free-for-all where master trusts could be set up with limited regulations governing them, the government has stepped in to tighten up the process. 

Salvus’ managing director, Graham Peacock, told FTAdviser that the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) invited master trust providers to contribute to the launch of the draft legislation and consultation on these workplace pension schemes on 30 November.

However, the regulator is already contacting these providers to secure their engagement in the process, as a Parliamentary slot for discussion of the bill is already arranged, Mr Peacock revealed.

He said: “There will be a six-week consultation, and they’re not expecting a great deal of difference between the draft and final regulations.

“The TPR will be engaging with every master trust in a four-week window – due to Christmas and New Year - so by the second week of January they have taken feedback from every master trust.

“I think that a short consultation period over the Christmas break will mean that all interested parties will have very little time if any to formally respond and attempt to influence the regulation details in practice.”

One of the new rules will be a capital adequacy standard, which will mean that the providers will need to meet certain requirements in order to provide assurance about their financial situation.

Schemes will also need to be registered, with the legislation expected to come into force in October 2018.

The government and the regulator have been discussing these new rules since 2016, which are expected to drive consolidation in the market.

Mr Peacock said: “I have always found a bit odd, a bit bizarre how we, or any master trust, can be in business today with such little regulation being in place.”

He added: “The industry needs a strong regulatory framework and until I have seen what is proposed I cannot say if this will be achieved.”

Kusal Ariyawansa, a chartered financial planner at Manchester-based Appleton Gerrard, disagrees with Mr Peacock’s view.

He said: “Whilst it depends on the draft proposals, this has been whispered for a while, hence it should not require much time to give a considered (not definitive) response."

According to Mr Peacock, the reason for the short time consultation period is that primary legislation will be needed to put the new rules into force, which will require Parliamentary approval.

Due to Brexit, there have been several constraints on time available to pass new legislations.

He said: “I've been assured that they have a pre-agreed slot for a Parliamentary time-table for this.”

The DWP refused to comment on this matter, saying that the government has yet announced the date of the publication of the new rules.

A spokesperson at the TPR confirmed that the regulator intends “to consult with the industry on how the master trust authorisation regime will work and how the criteria should be met, which will be published within a code of practice at the start of next year”.

He said: “We have been in active discussions with the industry for over 12 months seeking to understand and assess the quality of master trusts, and are planning a further round of discussions after the DWP has published its regulations.

“We intend to work closely with those responsible for the running and governance of master trusts to ensure they understand the requirements and are ready to apply for authorisation in October 2018.”

If the government doesn’t get the legislation approved by the Parliament before October, providers will be left in a limbo, Mr Peacock argued.

He said: “I think we all need to probably take a little leap in the dark here.

“If we have a draft consultation that becomes the actual hard regulation subject to Parliamentary approval, I think we all will probably have to accept that we need to go ahead and do this, but [that this legislation] can be challenged in the House of Lords, for example.”

maria.espadinha@ft.com