Draft Occupational Pension Schemes (Scheme Administration) (Amendment) Regulations 2016

Debate between Simon Kirby and Angela Rayner

Thursday 3rd March 2016 General Committees

[Angela Rayner (Ashton-under-Lyne) (Lab)]

It is a pleasure to face the Minister again under your chairmanship, Mr Bone. It is rather unfortunate that, as I think one of the Guardian columnists has said, as soon as people see “pensions” in the title of anything in the media today, they glaze over. However, I hope that the Minister will not glaze over during my contribution today, because although the Opposition will not oppose these measures, we want to touch on several important concerns that are related to these regulations.

To put the measure into context, employers have a choice about the kind of pension they make available for their employees, with some choosing to use schemes based on a trust with trustees. Others choose schemes provided by insurance companies, which result in contracts between the providers and the employees. Such schemes include personal pension schemes and stakeholder pension schemes, which employers use for auto-enrolment or otherwise make available to their employees. There is no board of trustees and no fiduciary duty to the scheme member.

The market for multi-employer schemes, known as master trusts, is relatively new and has undergone rapid expansion in the last couple of years. The major players have been open for business only since 2011 and barriers to entry have historically been low. While no official list of providers exists, Professional Pensions sought to compile a definitive list in August 2015 and identified 57, but there could be as many as 70 or even 80 master trust providers in the UK. Employers have to try to distinguish between many offerings of varying quality, and there are concerns across the sector about regulation and governance.

In its evidence to the Select Committee on Work and Pensions’ current enquiry on auto-enrolment, the Association of British Insurers made the point that trust-based schemes, including master trusts, are not

“subject to the same stringent regulatory standards as contract-based schemes, which are regulated by the FCA.”

Instead, master trusts are supervised from a distance by the Pensions Regulator, which does not have the power to check how the pensions are sold or to shut down companies that fall short of basic standards. The Pensions Regulator highlighted the issue to the Work and Pensions Committee:

“94% of employers who chose a trust-based scheme opted for a master trust. Due to their scale, commercial purpose and design for use by multiple employers, master trusts represent different risks to members and consumer protection when compared to other occupational schemes. Unlike pension providers regulated by the FCA, the master trusts themselves are not authorised prior to market entry and the regulatory framework is not designed for similar levels of ongoing supervision. As a way of mitigating this risk, we introduced the master trust assurance (MTA) in May 2014, developed in partnership with the Institute of Chartered Accountants in England and Wales (ICAEW). However, it is a voluntary arrangement”.

Only five master trusts are part of the master trust assurance framework, meaning that they are independently audited.

Andrew Warwick-Thompson, executive director for regulatory policy at the Pensions Regulator, warned that some of the other schemes were too small and had no safeguards protecting their members. Alarmingly, he added:

“There is a risk of these schemes falling over; there is a risk that members might lose their money.”

He went on to warn that the lack of requirements for qualifications or assets meant that some master trusts

“may not be run by competent people”.

The so-called fit and proper person test appears to be even less stringent than that applied by the Football League. HMRC’s guidance suggests that it will automatically assume that anyone who applies is fit and proper. Perhaps the Minister will tell us whether the Government have any plans to change HMRC’s practice or guidance in that regard. Even when directors are qualified, providers do not always make it clear where the savings are invested and who owns the schemes.

The BBC programme, “The World Tonight”, also discovered that at least one master trust seemed to be providing misleading information online. The website, myworkplacepension.com, claims to have £50 million of pensions under management managed by the City firm, Old Mutual. When the BBC scrutinised the whereabouts of that money, myworkplacepension.com admitted it had no such assets. Subsequently, Old Mutual denied handling the company’s account and asked for its name to be removed from its publicity.

According to Companies House records, My WorkPlace Pension Ltd is 50% owned by Gavin McCloskey, who, with an associate, Anthony Okeke, was previously a director of a firm that sold sports fashion clothing. Incredibly, its trading name was Wide-Boys R Us.

[Simon Kirby (Brighton, Kemptown) (Con)]

Yeah! [Laughter.]

[Angela Rayner]

We may laugh, but it will hardly be amusing to someone who finds their employer has invested their pension with a dubious scheme and without safeguards. Alarmingly, the programme also cited one industry expert who suggested that only around 10 existing master trust schemes could be considered completely safe and reliable. There is a view, therefore, that strengthening the requirements to enter the market, such as with authorisation or licensing, should filter out the least desirable operators. We would like to know more about the regulatory framework within which the Minister envisages today’s regulations will sit.

This issue was raised by my hon. Friend the Member for Wolverhampton South West (Rob Marris), who, as shadow Financial Secretary to the Treasury, represented the Opposition during the Committee stage of the Bank of England and Financial Services Bill. The Economic Secretary to the Treasury responded that the Government would bring forward regulations as soon as practically possible. Can the Minister tell us today what discussions the Department for Work and Pensions has had with the Treasury about that legislation and give us an update? Perhaps he will tell us how such legislation relates to the comments of his colleague, the Minister of State for Pensions, in the press on 1 March. She complained that the Government would not give the Department parliamentary time for pensions legislation specifically in relation to master trusts. She said:

“We need legislation and have been bidding for a bill, a pensions bill but it has been refused. It was refused at the end of last year and it has still not happened…I am hoping we will get one because we can’t do anything properly without it.”

We seem to be in the extraordinary position of the Minister for Pensions admitting that she cannot do anything properly on this issue because she cannot get parliamentary time from her own Government, whose legislative agenda is hardly full. However, this seems to be flatly contradicted by the remarks of the Economic Secretary, so is the Treasury more up to date on pensions policy than the Minister for Pensions, or is that just where the power lies in this Government? Perhaps none of them knows what is going on.

If the Minister knows anything about his own Department’s legislative agenda, perhaps he would clarify whether we can expect a Bill and, if so, when. There are a number of questions about the regulatory framework on which it would also be helpful to hear his views.