Pensions feature once again in the Government's legislative programme for this Parliamentary session. However, the list of issues included in the proposed Pensions Bill (important as they may be) does not include the one issue that probably should be there.
What's going to be in the Pensions Bill?
The Government's proposals are limited to:
- Master trust regulation, which appears to be a bee in the Pensions Regulator's bonnet. The Government will introduce strict new criteria to set up a new master trust (a type of scheme offered to multiple employers who rely on a third party to do most of the work) and the Pensions Regulator will have more powers to supervise those that make it through the hoops.
- Exit fees cap, Provisions to cap early exit fees that discourage members from taking their pension savings out of existing pension schemes. Part of the Government's attempt to make the dubious benefits of its Pension Freedoms agenda available to all. This might be limited to trust-based schemes as the supporting documents refer to an FCA survey saying that 16 per cent of customers in a contract-based scheme could face some sort of early exit charge – which is completely irrelevant to regulating trust based schemes!
- One stop shop for pensions guidance. The Pensions Advisory Service, the Money Advice Service (MAS) and Pension Wise are to be merged to avoid duplicating each other's functions in giving pensions guidance. Another freedom and choice provision that will smooth the way to spending your pensions savings and paying lots of tax to the Treasury. The more broad "financial advice" element of MAS will pass to a separate body, which is sensible.
Is that it?
For now, yes.
In a year where pension providers have lost their last shot at stopping members transferring to possible pension scams through the Royal London case and the Regulator is defending its lack of action in the BHS fiasco, the Government has chosen to move against the existential threat posed by dodgy master trusts and remove barriers to its Pension Freedoms agenda.
As devil's advocate it might be possible to argue that the bill should include provisions that regulate the endless stream of odd-looking "Occupational Pension Schemes" offering "high returns!" in odd and surprisingly (financially) dangerous investments, set up by organisations that have no actual link to their members. Maybe the pensions guidance one-stop shop is intended to help members choose better?
It would be interesting to know whether the Government did any research before announcing its proposals as to the type of scheme that is used by pension scammers and those offering utterly inappropriate high-risk investments to the general public. Our experience points towards the master trust issue being relatively insignificant, but personal experience can be deceiving.
One other point from the speech – LISAs are on the agenda "to help young people save for the long term". Hopefully the sort of investments that can form part of a LISA will reflect that long-term aspiration but we will have to wait for the legislation.