Targeted support rules risk creating ‘two-tier’ system

Millions of workplace pension savers could miss out on targeted support because trust-based schemes currently sit outside the new regulatory framework, People’s Pension has warned.

The master trust has called on the government to extend the targeted support framework to qualifying occupational pension schemes, arguing that members should not receive different levels of help based on whether their employer selected a trust-based or contract-based pension.

People’s Pension backed the introduction of targeted support, describing it as a potentially significant step towards closing the gap between generic information and regulated financial advice.

However, the current framework applies only to Financial Conduct Authority (FCA)-regulated contract-based pension providers.

Trust-based workplace schemes, including master trusts regulated by The Pensions Regulator (TPR), fall outside that framework, meaning members cannot access the same form of targeted support through their scheme.

People’s Pension warned this could lead to savers facing different levels of assistance when making similar retirement decisions, depending on the regulatory structure of their pension rather than their individual circumstances.

It noted that targeted support could be particularly useful at key stages of the savings journey, including prompting members who may be under-saving, helping those approaching retirement understand income options and identifying when withdrawal rates could put long-term retirement income at risk.

While trustees may already be able to provide some forms of personalised support, People’s Pension argued that the absence of a clear legal and regulatory framework created additional complexity and compliance risk for trust-based schemes.

It stressed that this could act as a cultural and regulatory barrier to trustees providing support that might be perceived as crossing into regulated advice.

The provider is therefore calling for a TPR-supervised targeted support framework for qualifying occupational pension schemes, designed to give trust-based savers access to equivalent support and protections while recognising trustees’ different legal and fiduciary responsibilities.

People’s Pension chief commercial officer, David Meliveo, said: “Targeted support is a fantastic opportunity to help millions of people with their pensions who are never likely to have a traditional financial adviser.

“We cannot end up with a two-tier system where the vast majority of workplace pension savers miss out on targeted support simply because their employer chose a master trust rather than a group personal pension.”

Meliveo added that savers were unlikely to distinguish between FCA- and TPR-regulated schemes when making decisions around contribution levels, retirement income or drawdown sustainability.

“We want to be able to offer People’s Pension members the same kind of targeted support that contract-based providers are now developing," he said.

"Government has an opportunity to create a level playing field that allows trust-based schemes to do that safely, so the type of pension someone’s employer chose does not dictate the quality of help they get.”

This article originally appeared in our sister publication Pensions Age.

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