Looking after individuals’ retirement savings is a responsibility which demands robust safeguards and controls. The process of setting up and running some types of pension scheme, such as Master Trusts is very light, with relatively little scrutiny of the individuals involved or the financial resources standing behind them.
Recent high profile final salary scheme problems illustrate that the governance of workplace pensions generally is in need of review. This Committee report, coming just a few days before the Queen’s speech, looks like a timely reminder to the Government that a Pensions Bill to address these concerns might be a necessary addition to their forthcoming legislative programme.
Pension schemes regulated by the FCA, such as Group Personal Pensions and Group Sipps can be considered a much lower risk than Master Trusts; similarly, any Master Trust scheme which has the Pensions Regulator’s Master Trust Assurance stamp of approval is likely to be well run.
In view of these ongoing concerns about the risks to auto-enrolment, the Government might also want to look at the option of allowing individuals to make their own choice about which pension their employer’s contributions are paid into, thereby putting the individual in control of their own financial future.
We also recognise the Committee’s concerns about employees opting out of work place pensions, into Lifetime ISAs (LISA) instead. Many employers are likely to offer the option of a LISA alongside their company pension. Given the better returns available through workplace pensions, it is vital that employees are given clear and accurate information and guidance on which choice is likely to be best for them.”
According to the Pensions Regulator, at April 2016, 124,487 employers had complied with their auto-enrolment duties, covering 21,897,000 employees and bringing 6,214,000 new members into workplace pensions.