Auto enrolment – are your savings safe?

Workers retiring on the new state pension rate may expect to receive £155.65 per week but a study has predicted that 55% of claimants will receive less than this weekly rate as a consequence of contribution gaps or opting-out.

Additionally, sustained encouragement has been given by the government to workers to take out supplementary pension plans to ensure that they are sufficiently provided for in their old age. However, recent research has revealed that these very people could be at risk of losing their savings following fears that many companies providing auto-enrolment pensions are likely to be too small to survive.

Experts claim that the problem could affect up to a quarter of a million people a year who are investing in so-called ‘master trust’ pensions, the risk being that the scheme is unsustainable and members may ultimately lose their money. This type of scheme is popular with the 1.8 million small employers with fewer than 30 staff currently signing up under the auto-enrolment programme.

Unlike contract-based schemes provided by the big pension providers, ‘master trusts’ are not regulated by the FCA but are overseen by The Pensions Regulator (TPR) which provides a much lower level of supervision. The threat here is that there is little member protection for such vehicles. A report for the industry cites only around 10 master trusts may be reliable operators (out of 80) because many are considered too small or not sufficiently profitable and, of the master trust providers registered with the Pensions Regulator, only five have currently been given a ‘kite mark’ known as the Master Trust Assurance Framework.

The government has stated that it was aware of the issues related to some master trusts, and was working to protect employees’ savings as ‘ensuring long term security and protection are paramount in pensions’. Existing members of a ‘master trust’ pension scheme and newly subscribing smaller employers may wish to view the Pension Regulator’s website for further details of ‘master trusts’ and the Master Trust Assurance scheme.

Should you be concerned by any of the issues raised, a consultation with one of our experienced team may be appropriate. Contact us.