Hard working people doing the right thing and saving for their futures want to know that their pension scheme is safe and well run. Clearly, that is the least they should expect.
And from today, millions of pension savers can look forward with greater confidence as we press ahead with introducing a new regulatory regime for master trusts.
These multi-employer schemes have much to commend them – they have the potential to offer great
advantages for both members and employers, due to their scale, good governance and value for money.
But for too long, they have been subject to lower levels of regulatory scrutiny than contract-based providers.
I’m clear that nobody’s savings should be less secure simply because of the pension scheme chosen by their employer. That is why securing Parliament’s backing for a new authorisation and supervision regime governing master trusts is a significant step forward in bringing these schemes into line.
The strict new tests we are introducing will ensure current and future master trusts are strong, safe and well placed for consumers and employers to invest their pension contributions. Following the debates in the Commons and Lords, these tests will be applied by the Pensions Regulator from the start of October.
These tough new powers will protect the 10 million members of master trust schemes – who have a combined £16 billion worth of assets invested – providing equivalent protection to members in other types of scheme.
Under the new regime all current and prospective master trust schemes will need to apply for authorisation to operate in the market.
The regulator will also have greater ongoing powers to work with, and if necessary, de-authorise master trusts where they are at risk of failing.
And master trusts will have to demonstrate to the regulator on an ongoing basis that they continue to meet the strict authorisation criteria, including demonstrating provisions to ensure member funds are protected in the event of a scheme needing to be wound up.
The action we are taking reflects the rapid growth of this market since 2012. There are currently around 80 master trusts, serving over 90 per cent of savers who have been automatically enrolled into a workplace pension.
Given the enormous success of automatic enrolment, with approaching 10 million people now saving that otherwise would not be, the time is right to introduce greater protection.
This compliments the measures the Government is taking forward to support the Pensions Regulator to be clearer, quicker and tougher in its approach to defined benefit pensions, and introducing new penalties including higher fines and criminal offences for reckless behaviour that puts pension schemes at risk.
The consultation on protecting defined benefit pension schemes – ‘A stronger Pensions Regulator’ – which we launched last month is an important part of ensuring we get the changes right so that we minimise the impact on the majority of employers who are doing right by their pension schemes.
Our message to savers is clear – you should be able to plan for your retirement safe in the knowledge your money is safe. The Government is doing all we can to ensure you can.