New welfare rules risk deepening inequality divide
The government’s new financial support rules exclude master trusts, leaving millions of workplace pension members without the same assistance available to those in contract-based plans. The difference stems from regulatory oversight: master trusts, which are governed by The Pensions Regulator (TPR), lack access to the targeted guidance that Financial Conduct Authority (FCA)-regulated providers can offer. This creates an uneven system where savers’ benefits depend on their employer’s pension choice rather than their individual circumstances.
People’s Pension, a leading master trust provider, has highlighted the issue, warning that the current approach risks establishing a two-tier structure in retirement planning. Under existing rules, only FCA-regulated schemes can deliver personalized guidance—short of full financial advice—to members who may not seek professional help. Trust-based schemes, which cover a vast number of workers, lack a comparable system, leaving their participants with limited options for tailored support.
Targeted support was designed to fill the gap between generic pension information and full financial advice, particularly for those unlikely to consult an adviser. It helps members adjust contributions, evaluate retirement income strategies, or assess withdrawal risks. Without this framework, trust-based savers face unequal treatment based solely on their employer’s pension selection, rather than their personal financial situation.
Regulatory Gray Area Stifles Trustee Support
The provider points out that trustees can offer some personalized assistance, but the absence of clear regulatory guidelines creates uncertainty. Trustees may avoid providing support to prevent accidental breaches of advice regulations, which carry stricter legal consequences. People’s Pension proposes a TPR-supervised framework for trust-based schemes to ensure equivalent protections while allowing trustees to fulfill their responsibilities without excessive risk.
David Meliveo, People’s Pension’s chief commercial officer, stated that the exclusion could leave most workplace savers at a disadvantage. “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.” He noted that savers won’t differentiate between FCA and TPR schemes when making decisions about contributions or withdrawals, yet their access to help will depend entirely on the pension’s structure.
The government’s intent behind targeted support was to improve retirement outcomes, but the current design may instead widen disparities. Trust-based schemes frequently serve lower-paid workers and smaller employers, now facing a regulatory barrier that contract-based plans do not. Without changes, the gap could expand as FCA-regulated providers develop more advanced support tools, further marginalizing trust-based members.
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Call for Fairness in Pension Guidance Rules
People’s Pension has called on the government to extend the framework to qualifying occupational pension schemes, ensuring trust-based members receive the same level of guidance. The push reflects broader concerns about fairness in pension regulation, where structural differences, not individual needs, dictate access to assistance.
The provider stresses that any solution must balance safety with practicality. A TPR-led approach could enable trustees to offer targeted support without exposing schemes to unnecessary compliance burdens. Without such a framework, the choice of pension scheme may determine the quality of help workers receive, a distinction that no saver should encounter.
Trustees in master trusts currently operate under The Pensions Regulator’s guidelines, which do not explicitly permit the same level of personalized support as FCA rules. This omission forces schemes to handle a regulatory gray area, where the fear of unintended advice violations discourages proactive assistance. The absence of clarity leaves millions of savers without the tools to make informed decisions about their retirement finances.
While the government has not yet responded to the provider’s call, the issue raises questions about whether targeted support should be tied to regulatory oversight rather than the needs of savers. If the current structure remains unchanged, the divide between FCA and TPR-regulated schemes could persist, leaving millions of workers with fewer resources to plan for retirement.
The debate shows the need for a unified approach to pension guidance, ensuring that all savers, regardless of their employer’s scheme, have equal access to the tools they need. Without intervention, the regulatory gap may deepen, creating lasting inequalities in retirement preparedness.
