Labour has accused The Pensions Regulator (TPR) of being too passive in improving member representation in master trust governance.
Shadow work and pensions minister Debbie Abrahams told the House of Commons TPR has "turned a blind eye to this matter" and "that is not acceptable".
The comments were made during a debate on the Pension Schemes Bill in the House of Commons on 29 March, where the draft legislation passed its last stage in the chamber.
During the debate, a Labour amendment to mandate that at least a third of master trust trustees are member-nominated was rejected by 289 votes to 187.
Commenting on the bill, Abrahams said members had a democratic right to be on master trust boards.
"The Pensions Act 2004 enshrined the right to have at least a third of the trustees of a trust-based scheme nominated by scheme members," she said. "That stems from the basic democratic principle that those for whom decisions are being taken should have a say in those decisions.
"TPR agrees that master trusts are covered by that legislation, which is why some already have member-nominated trustees. The regulator has, however, turned a blind eye to this matter, on the basis that having multiple sponsoring employers presents a barrier.
"That is not acceptable, and we have urged the government to clarify and apply the law in this regard."
She went on to say that it was important for members to be represented due to "the increased risk being borne by scheme members".
A spokesperson for TPR said member representation was a matter for master trust boards to decide.
"The 2004 Act requires that where all trustees are not independent one third of trustees must be member nominated. The 2015 legislation which introduced the new requirements for independent trustees on master trust boards deliberately did not require member-nominated trustees and left it to the boards to decide themselves how best to seek member views," they said.
"One reason for this was the extreme complexity of seeking member-nominated trustees in an environment of thousands of employers, millions of members and high membership turnover."
Funder of last resort
Abrahams also criticised the government for throwing out a Labour amendment to introduce a funder of last resort for master trusts. The amendment was agreed by the Lords, but then removed at the Commons' committee stage. Shadow pensions minister Alex Cunningham then tried to reintroduce it in the Commons, but it was rejected by 289 votes to 230.
Abrahams said she hoped the government's confidence in its legislation was not misguided.
"It is a shame that the government did not heed the advice of our noble friends in [the House of Lords] and provide for a funder of last resort," she said. "The minister believes the new regulatory framework provides sufficient protection to make this provision unnecessary, yet he seemed unwilling to give a guarantee that no future master trust would go bust.
"I am glad that he has such faith in the regulatory regime, and I genuinely hope, for the sake of scheme members, that his faith is justified."
The Department for Work and Pensions (DWP) had not responded to a request for comment at the time of publication.
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