What were the main provisions of the latest Pensions Bill?
Another Queen’s Speech, another piece of pensions legislation. But what’s in the 2016 Pensions Bill?
The bill, one of 20 unveiled today, promises to reform Britain’s private pension system in three key areas:
The promise to ramp up the regulation of mastertrusts grabbed the most attention. The government said mastertrusts would be required to demonstrate they met “strict new criteria” before entering the market.
It also confirmed it would hand the Pensions Regulator additional powers to authorise and supervise mastertrusts and intervene when necessary.
TPR chief executive Lesley Titcomb welcomed the announcement.
She said: “We have voiced concerns for some time about the need for stronger legislative standards for master trusts and have worked with government and other regulators to improve levels of protection for members.
“We have been calling for a significantly higher bar regarding authorisation and supervision, and we are pleased that today’s announcement proposes to give us the power to implement these safeguards.
Capping exit fees
The latest bill will also tackle the barriers faced by members who want to quit schemes to access their savings flexibly.
The government said it would cap early exit fees charged by trust-based schemes and create “a system that enables consumers to access pension freedoms without unreasonable barriers”.
But LCP partner Andy Cheseldine said it was unclear from the bill whether these measures would be targeted at trust- or contract-based schemes.
“The Pensions Bill pledges to remove barriers that are currently preventing consumers accessing their pensions saving flexibly,” he said.
“Yet clarity is still required as a main provision for this is capping early exit fees charged by trust-based occupational pensions schemes. It later provides FCA data showing nearly 700,000 (16%) of customers in contract-based schemes could face an early exit charge.
“Whether this is a simple mix-up of terminology or a lack of relevant data, it is likely the industry will be awaiting further information.”
Merging MAS, TPAS and Pension Wise
The government also signalled a further shake up of pension guidance services. It promised a new organisation combining the Pensions Advisory Service, Pension Wise – launched last year - and the pensions elements of the Money Advice Service.
Another body, which will be tasked with identifying gaps in the financial guidance market, will be created to replace the Money Advice Service.
The government said launching the two new organisations would provide “more targeted support for consumers” and help to deliver its manifesto pledge give people the freedom to spend their pension however they liked.
TPAS chief executive Michelle Cracknell welcomed the announcement. ”We knew this was going to happen because it was in the Budget in March,” she said. “We’re really pleased that the Government has recognised that this needs to be a public service and that pensions is special and needs a separate organisation to the money and debt guidance services.”
The Government has previously said the new organisation will be launched no sooner than April 2018.