March 04, 2016
Businesses that are shopping around for a workplace pension provider in order to comply with auto-enrolment have been warned by the Pensions Regulator that some schemes may be risky.
Master trust pensions - which include the Government scheme Nest - have proliferated since auto-enrolment was introduced. These "off-the-shelf" workplace pensions are popular with small businesses.
However, unlike other pension schemes that are tightly regulated by the Financial Conduct Authority (FCA), master trusts are simply "overseen" by the Pensions Regulator and don't offer the same level of protection.
Andrew Warwick Thompson, executive director for regulatory policy at the Pensions Regulator said that under the current arrangements "there is a risk of these schemes falling over; there is a risk that members might lose their money." He said some of the small pension providers "may not be run by competent people".
And an investigation by the BBC has raised serious questions about the credibility of one new entrant in the master trust pension marketplace.
Harriet Baldwin, economic secretary to the Treasury, has told Parliament the Government is now looking to beef up regulations governing master trusts in order to protect employees with workplace pensions.
And pensions minister Baroness Ros Altmann said: "We are determined to ensure the necessary protections are in place. Doing nothing is not an option, as ensuring long term security and protection are paramount in pensions."
According to the This is Money website , there are around 80 master trusts in operation. But of the master trust providers registered with the Pensions Regulator, only five have so far been given an official "kite mark" under the Master Trust Assurance Framework.
Between now and February 2018, about 1.8 million small firms will need to comply with automatic enrolment and enrol staff into a pension scheme of their choice.