Last week, the annual Queen’s Speech outlined the laws that the government hopes to get passed by parliament over the coming year. One of the 20 pieces of legislation unveiled was the Pensions Bill, which includes three key measures. Here’s a round up of what they might mean for your pension.
Regulating master trusts
Last October, the Pensions Regulator’s Chief Executive Lesley Titcomb warned that auto-enrolment was leading to a rise in the number of “master trust” schemes, which allow multiple, unconnected employers to pool their pension arrangements. These cost companies less than traditional single employer schemes, but they are also subject to far less regulatory scrutiny and fewer solvency requirements, which means that workers might face losing their savings if the firm running the trust goes bust. So the Pensions Bill will introduce new rules to tackle this.
Master trusts will face “strict new criteria” before entering the market, including a new capital adequacy requirement. The Pensions Regulator will be handed fresh powers to police the schemes and intervene when necessary to ensure they comply with the rules. These new protections will not just apply to newcomers, they will eventually apply to every master trust on the market.
A cap on early exit fees
Up to 700,000 people may be liable to exit fees if they want to access savings held in trust-based occupational pension schemes, according to the Financial Conduct Authority (FCA). The Pensions Bill will place a cap on these charges, with the intention of making these schemes more compatible with the new pensions freedom regime and enabling consumers to access their pots without facing “unreasonable barriers”.
The FCA is consulting on where to set the limit, but the move is expected to save some retirees thousands of pounds. The new cap is expected to be implemented before March 2017.
Restructuring financial guidance
The existing pensions guidance services run by the government – the Pensions Advisory Service, Pension Wise, and the pensions services offered by the Money Advice Service – will be merged to produce a one-stop-shop for all enquiries about retirement funds. In addition, the Money Advice Service will be scrapped, to be replaced with a new, slimmed-down money guidance body that is intended to fill in gaps in the financial guidance market.