A new Pensions Bill was introduced today as part of the Queens speech, to strengthen the regulation of master trusts pension schemes.
The proposal comes following pressure from MPs calling for the Bill due to concerns over the regulation of these schemes, which are often provided by external organisations.
A recent report published by the Work and Pensions Committee also warned of 'unstable' master trusts in the market.
Under the new proposal, master trusts would have to demonstrate that schemes meet "strict new criteria" before entering the market and taking money from employers and members.
Commenting on the new criteria, Fiona Matthews, managing director LifeSight, Willis Towers Watson's master trust, said: "It has not yet set out what these will be but it is better to get the details right than to publish them early."
She added, however, that raising the minimum requirements for entry into the master trust market was of "paramount importance".
The Bill seeks to provide better protections for members in a number of aspects such as capping early exit charges and providing greater powers for the Pensions Regulator to supervise these schemes.
It also plans to restructure the three financial guidance providers: Pensions Wise, the Pensions Advisory Service and the Money Advice Service. This was previously announced in the chancellor’s latest budget statement.
Pinsent Masons partner Tom Barton said: "There are already very large numbers of master trusts up and running and taking in contributions. This looks like a fairly belated attempt to create a barrier to entry, unless it is to apply to existing schemes too."
Ralph Frank, head of defined contribution pensions at investment firm Cardano, said: "The trustees should have a clearly-defined business plan to run the master trusts, both on an ongoing basis and through wind-up, outlining the financial resources required to protect members' interests.
"We should expect The Pensions Regulator to hold trustees to account where members' interests have not been best served."
