Report by the work and pensions select committee fears taxpayers losing retirement savings because of ‘unstable master trusts’
GAPS in pension law and regulation have allowed “potentially unstable master trusts” onto the market, putting the success of auto enrolment at risk, a report by MPs has found.
The work and pensions select committee has released a report labelling auto enrolment as so far being a “tremendous success”, but has warned of the potential pitfalls to taxpayer’s pension savings because of “potentially unstable master trusts” occupying the market.
‘Auto-enrolment will be undermined’
According to the report, there have been a number of concerns towards the 72 registered master trusts that are currently open, claiming that the pension regulator’s (TPR) regulatory powers with regards to master trusts are “insufficiently robust”.
“Gaps in pension regulation have allowed potentially unstable master trusts onto the market. Should one of these trusts collapse, there is a very real danger that ordinary scheme members would lose their retirement savings,” warned the report.
“There is also a risk that wider faith in auto-enrolment will be undermined. The pension’s minister told us that she wants a Pensions Bill for stronger regulation of master trusts. We support this.”
The report adds that TPR said that it was concerned it was “not able to exercise stronger regulation on this group, given their importance, the number of employees—members they are serving”.
A recent survey found that auto enrolment tops the list of concerns for UK businesses, alongside the upcoming European referendum.
SMEs ‘need automated support to cope with AE’
Frank Field MP, chair of the committee, said: “Auto-enrolment has been a tremendous success that will ultimately see approximately nine million people newly saving, or saving more, in a pension. Crucially now we must do much more to ensure that people’s savings are put in the best possible place, and are secure.
“To this end, we greatly look forward to seeing a Pension Bill in the Queen’s Speech this week. This is what we and others have been calling for.”
The report also criticises HMRC’s decision to not go ahead with plans to develop basic PAYE tools (BPT) to support auto enrolment.
It notes: “The BPT are trusted by small and micro employers, many of whom will not be able or willing to use commercially available software. TPR has acknowledged that small and micro employers need automated support to cope with AE.
“Its solution has been to build an entirely separate Basic Assessment Tool that has limited functionality and cannot send information to pension providers. This risks undermining AE.”
The committee recommends that HMRC work with the DWP to expand basic PAYE tools to support small businesses in meeting their automatic enrolment obligations.
HMRC recently came under fire in regards to its ‘making tax digital’ initiative, with tax experts advising the government department to push the project back by at least a year.