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No need for alarm bells....
There is nothing wrong with selecting a well run well financed Master Trust.
The sad news is there are precious few of them about. How many of the 70-80 schemes listed on the ABI/NAPF sites are actually well run and well financed? Many will go by the wayside as you suggest in your article Peter, SMART know this because they already contain two such master trusts within their own stable.
How many people know the difference between the way that a Master Trust is funded compared to a contract based pension scheme? Is this important...hell yes!
Tax relief is important to all who can claim it as well and how many schemes only offer Net pay as this is the way that Master Trusts traditionally grant tax relief. NOW:Pensions have just announced that they will pay any lost tax relief from their own pocket as they accept that lower earners have lost out because of this Net pay basis and this is fantastic news in my view.
How many people know the difference between Net pay and Relief at Source? Is it important...hell yes!
Master Trusts are not bad nor should they be vilified but by the same token people involved in dealing with them should understand what they are recommending for their clients and why.
Need for more transparency
Capital adequacy is a key issue. L&G' CEO Nigel Wilson was quoted last week criticising the over zealous EU solvency II regulations that tie up capital within the insurance sector. His argument - you can have too much of a good thing.
Occupational schemes (of which master trusts are one species) are not subject to Solvency II and have no capital adequacy requirements whatsoever. You can have too little of a good thing
The master trust assurance framework does not address capital adequacy. There are a lot of master trusts who are currently "winging it" and our risk based Pensions Regulator knows it
And...
The most famous Master Trust NEST is currently trading insolvently but is supported by a £400m + loan (max drawdown £600m from the tax-payer. The NAO is looking to shorten the loan payback period and we wait to see how this will be achieved!