As widely rumoured, yesterday’s Queen’s Speech confirmed that the Government will bring forward a new Pensions Bill in this Parliament to address a number of issues including better protection for members of master trusts, removing barriers which hinder members from making use of pension freedoms and re-shaping the delivery of pensions guidance and advice on financial matters. A Lifetime Savings Bill will also be brought forward to implement the legislation to create Lifetime ISAs.
The new Pensions Bill
Although the speech read out to the Houses of Parliament by the Queen did not make reference to a new Pensions Bill, briefing notes accompanying the Queen’s Speech confirm that we can expect a Pensions Bill to be brought forward in this Parliament. Amongst other things the Bill will provide for:
- better protection for members of master trusts
- the capping of early exit fees charged by trust-based occupational pension schemes and removing other unreasonable barriers to the use of pension freedoms
- the merger of the Pension Advisory Service, Pension Wise and the pension services offered by the Money Advice Service into a single body, and
- the creation of a new financial advice body to replace the Money Advice Service.
Regulation of master trusts
Over recent months there have been growing concerns about the long-term sustainability of some auto-enrolment master trusts and the potential negative impact that the disorderly wind-up of a master trust would have on the affected savers and, more generally, on confidence in auto-enrolment and long-term saving. This has led to calls for the introduction of new legislative measures to seek to avoid this and to provide better protection for members in the event that a master trust is wound-up.
Briefing notes to the Queen’s Speech indicate that the new Pensions Bill will include new criteria before a master trust can enter the market and give the Pensions Regulator greater powers to authorise and supervise these schemes and take action where necessary. Alongside this we might also see:
- additional governance requirements for master trusts, such as the need to have suitable and robust business models and exit plans in place, and
- the creation of a compensation scheme to offer greater protection to members in the event of a master trust failure.
The Lifetime Savings Bill
The Queen’s Speech also confirmed that there will be a Lifetime Savings Bill which will contain legislation:
- to create the new Lifetime ISAs, and
- to create a new Help to Save scheme, which would support those on the lowest incomes to save.
The Government has already set out the high level design features for Lifetime ISAs, which are due to come into force from April 2017. Final details are due to be set out later this year.
We are pleased that the Government is taking action to provide greater protection to members of master trusts. Whilst there are many well run master trusts with robust governance arrangements and business models in place, there is concern that some at the smaller end of the market might not be sustainable in the medium to long-term. Ensuring that master trusts are sustainable and fit for purpose is essential to the success of auto-enrolment and to maintaining consumer confidence in pension saving. Therefore, it is crucial that the Government takes this opportunity to put in place a robust and comprehensive regime to protect savers.