Master trusts are to be under legal scrutiny and targeted with new restrictions as laws on pension schemes are strengthened.
New legal powers to scrutinise these trusts had their first reading in the House of Lords this month.
Corinthian Group Managing Director Robert MacGregor said: “We welcome the Pensions Bill being passed in law”.
Corinthian’s preferred pension scheme, Salvus Master Trust, has already achieved the Master Trust Assurance Framework (MAF) accreditation, which is the Pensions Regulator’s new standard. And it has also received a five-star rating from Defaqto, the independent financial products’ researcher.
Five key criteria were included in The Pensions Bill:
• That “Fit and proper” people are involved in a master trust’s management
• The scheme must be financially sound
• It must have an “adequate continuity strategy”
• Appropriate systems and processes should exist for their governance
• And also for their administration
“It’s simply a consumer protection item,” said pensions minister Richard Harrington at the recent Pensions and Lifetime Savings Association’s Annual Conference in Liverpool. “We can’t have a system where some pension schemes are more regulated than others.”
The PLSA is also calling for a rigorous scrutiny process to ensure the criteria are being met. A new legal framework could greatly boost the reputation of master trusts. This reputation has been tarnished by how some have not adequately provided for their members. As the schemes have had less governance than other pension plans and low entry barriers, it meant anyone could set one up for a low capital cost.
This has meant the benefits of master trusts have sometimes been overlooked. These include offering employers the benefit of a governance function but with generally low operating costs as well as greater simplicity and expediency than a single employer scheme.
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