Master Trust schemes: definition

Part of Pension Schemes Bill [Lords] – in a Public Bill Committee at 10:00 am on 7th February 2017.

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Photo of Richard Harrington Richard Harrington The Parliamentary Under-Secretary of State for Work and Pensions 10:00 am, 7th February 2017

Amendments 1 and 20 will prevent what would have been an unintended effect of the Bill, for which I apologise. I am grateful to the other place for its scrutiny of the Bill, and particularly to Lord McKenzie—I have complimented him so many times in this sitting that I shall take my gratitude to him as read for the rest of our proceedings, but I really must thank him for bringing this matter to our attention. The amendments, which we indicated in the other place that we would table, will fix the issue that he pointed out. Without them, where a scheme has a mix of money purchase benefits and non-money purchase benefits, a funder would not be able to conduct activities in relation to the non-money purchase benefits. That was clearly not our intention, but it was the effect of the interaction of clauses 1(2) and 11. Amendments 1 and 20 will amend clauses 1 and 40 respectively to fix that.

Clause 1(2) provides that where a master trust scheme provides both money purchase benefits and non-money purchase benefits, the Bill’s provisions will apply only to the money purchase benefits. Clause 11 requires the scheme funder to be set up as a separate legal entity that is defined, broadly, as a legal person whose only activities are in relation to the master trust. As a result of clause 1(2), for a scheme with mixed benefits, the reference to the master trust in clause 11 would cover only the money purchase elements, which could mean that schemes or scheme funders would have to be restructured for reasons that we did not intend.

Amendment 20 will therefore add a further exception to the principle that the provisions of the Bill apply only to money purchase benefits, in addition to those already provided by clause 40, which we will consider later. The reference in clause 11(3) to the master trust will relate to the scheme as a whole, not just to the money purchase benefits. That will ensure that the scheme funder can engage in activities in relation to any part of the scheme.

Amendment 1 will make a minor consequential amendment to clause 1(2) to reflect the amendment to clause 40. The combined effect of the amendments will be to ensure that clause 11(3) works as intended for mixed benefits schemes.