It was recently announced in the 2016 Queen’s Speech that a new Pensions Bill is to be laid before Parliament, with a view to strengthening the existing safeguards for private pension scheme members.
The Pensions Bill is intended to introduce the following:
Greater protection for members of master trusts
Following the introduction of automatic enrolment there has been an increase in the popularity of master trusts. The Pensions Regulator identified that since 2009, a majority of new members to Defined Contribution (DC) schemes have joined master trusts. However this increase in popularity has added to a long standing concern over their regulation.
The Pensions Bill is intended to grant more powers to support the Pensions Regulator, as it attempts to “protect consumers from poorly governed master trusts”. According to reports, the Pensions Bill will require that master trusts demonstrate that schemes satisfy strict criteria before they can be used by employers or scheme members. Further, the pensions minister has indicated that these new requirements will apply to existing master trusts.
A new pensions guidance body
The Pensions Bill is intended to create a new pensions guidance body. The Pensions Advisory Service, Pension Wise and the pensions services provided by the Money Advice Service are to be combined to create a new organisation, which will be charged with providing accessible pensions guidance to customers.
In addition to the Pensions Bill, the Queen’s Speech saw the announcement of the creation of a framework for the operation of the Lifetime ISA (LISA). The Lifetime Savings Bill is intended to set out how the LISA will work. The LISA was proposed in the 2016 Budget and is intended to come into effect on 6 April 2017. It is hoped that the LISA will encourage people to save for their first property or for retirement (or both), with the help of a government “top up” of 25% on all savings up to £4,000 a year.
The Queen’s Speech also highlighted that early exit fees charged by trust-based occupational pension schemes are to be capped. This announcement followed a statement by HM Treasury in January that a significant number of people had been prevented from using the new pension flexibilities because of significant exit charges or lengthy transfer delays.
Most of the announcements in the Queen’s Speech on the new legislative programme for pensions are uncontroversial. However, there is a level of concern over the introduction of LISA and the effect it could have on the pensions industry. There have been calls for caution on the introduction of LISA, with fears that it may have a negative impact on younger savers who may not fully appreciate the differences between LISA and a traditional pension.
This Bulletin is for general information only and should not be relied upon as advice on your specific circumstances. If you wish advice on any issues highlighted in this bulletin, please contact Andrew Holehouse, Louisa Knox or Edwin Mustard on +44 (0)131 473 5385.