The Pension Scheme Bill is set to increase standards and sustainability of master trusts schemes.

At the House of Commons’ Pension Scheme Bill reading yesterday evening, 30 January 2017, Conservative MP, Southampton, Royston Smith emphasised that the newly set standards are long overdue.

“We insist that our taxi drivers pass a fit and proper person test so that they can carry passengers, but until now, there has been no such requirement on all those who operate master trusts and are potentially responsible for a worker’s entire retirement savings”, he said.

With as many as 84 trusts in operation today, the Bill states that master trusts now have to demonstrate five key things. These being: that individuals involved in the scheme are fit and proper, that the scheme is financially sustainable, the scheme funder can meet cetain requirement, that scheme processes and systems for governance and administration will ensure it is run effectively and that the scheme has a reliable continuity strategy.

In order to remain authorised, schemes must continue to meet this criteria.

Scottish National Party shadow spokesperson Ian Blackford, backed the new regulations and said “It is currently extremely easy for anyone to set up a master trust and accept savers’ funds”.

However, Blackford criticised the fact that there is no method in place to deal with the collapse of a master trust scheme.

In relation to this, The Pensions Regulator has been assigned new powers to oversee master trusts and is able to intervene where schemes are at risk of falling below or not meeting the required standards.

TPR said: “We are very pleased that the Pension Scheme Bill will drive up standards and give us tough new supervisory powers… ensuring members are better protected and ultimately receive the benefits they expect.”

Moreover, the Bill also amends the 2014 Pensions Act to enable regulations to restrict pension charges. The new ruling aims to ensure that members are not dissuaded from taking advantage of pension freedoms as a result of high early exit charges.

Work and Pensions Secretary of State Damian Green noted that hidden costs and charges tend to “erode savers’ pensions” and so the committee are “committed to giving members sight of all the costs that affect their pension savings”.

He added that there are plans to “consult later in the year on the publication and onward disclosure of information about costs and charges to members”.

Nonetheless, the Bill was criticised for not referring to transaction costs, charges applied by asset managers when making new investment decisions.

Work and Pensions Shadow Secretary of State Debbie Abrahams noted: “There is a great deal of work to be done to tackle the problem of opaque and excessive costs and charges being extracted from workers’ savings by investment managers. Currently the Bill merely scratches the surface. It must become a stronger vehicle for change in this regard.”

While transparency is not wholly mentioned in the Bill, Pensions Minister Richard Harrington noted that it is “in the spirit of the Bill”.

“The regulator will be provided with many powers that will help to enforce transparency and members’ rights, which have been discussed,” Harrington explained.

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