Pensions minister Ros Altmann has called for stronger regulation to protect people who are in multi-employer pensions.

Multi-employer pension arrangements, or 'master trusts', have grown rapidly as the workplace pension market has expanded.

Since 2012, 6million people have saved into a workplace scheme as a result of auto-enrolment.

Altmann told the Work and Pensions Select Committee that she is concerned that master trusts leave people exposed because of the lack of regulation.

In particular, she is concerned that master trusts, which target the auto-enrolment market, are not subject to the same capital adequacy requirements or consumer safety nets as the insurers they compete with.

She said: "Currently there are no protections in place for savers in the event of a wind up of a master trust, which is why I am so concerned and we know doing nothing is not an option."

"The issue is the assets may well be protected by the FSCS or some other mechanism, but the costs of wind-up for master trusts may have to come out of the assets of the trust and the members' pensions may be impacted."

Altmann added that "now is the time to act" to increase consumer protections.

"I have been pressing for a Pensions Bill but so far we don't have one – another route is to give The Pensions Regulator more power," she said.

Earlier, the committee heard that around 70 master trusts operate in the auto-enrolment market.
Lesley Titcombe, chief executive of The Pensions Regulator, told MPs there was a gap in the master trust regulation that left savers exposed.

She said: "We have been concerned that we are not able to exercise as strong a regulation on this group given their importance.

"We introduced the master trust assurance framework with the Institute of Chartered Accountants as a way of trying to help employers choose a scheme, but I would certainly like more regulatory tools available to me in this space."

Master trust providers said that while there were worries around a small number of master trusts, the "vast majority" were run according to stringent governance and capital requirements.

Graham Peacock, managing director of Salvus Master Trust, said: "The high cost of set up and the need for independent trustees means that master trusts by necessity have a strong commitment to market over the long term."

"We are therefore confident most of these will be able to deliver good returns to their members."

Gareth Shaw, head of consumer affairs at Saga Investment Services, warned that the pace of reform could be off-putting for some people.

He said: "One of the biggest reasons people don't engage with pensions is that the government is continuously changing the rules and there's still further tinkering expected in the forthcoming Budget.

"If the expectation is for people to commit to saving for the long term, the government must give people the confidence to do so, not leave them fearing that what they save today will look wildly different when they finally come to claim their pension.

"It must consider slowing down the pace of its reforms to give consumers the time to plan and make the most of their retirement savings."

First published 11.03.2016

Lindsay.sharman@wilmingtonplc.com