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DC Master Trusts - in more detail

 


DC Master Trusts – workplace pension schemes of choice?



With all DC Master Trusts now operating under authorisation and ongoing supervision by the Pension Regulator (TPR), members can take comfort from the fact that their retirement savings are protected and managed to the highest standard.

Research on behalf of TPR published in May 2019 revealed that, in virtually all areas of scheme management and governance, Master Trusts demonstrate greater rigour, thoroughness and consistency than the own-trust environment overall. (Source: Defined Contribution trust-based pension schemes research - Report of findings on the 2019 survey. Prepared for the Pensions Regulator by OMB Research May 2019.)


Meanwhile, growing numbers of members don’t have enough saved at the point of retirement and we’re drawing too heavily on what we do have. Widespread failure to access education, guidance and advice is leading to less than well informed decisions, from how much we save and how we invest through to how and when we access our pots.

 

Many employers sponsoring own-trust, or even contract-based arrangements, are questioning whether their employees, and their own business objectives, are being best served in terms of
quality of governance, administration, investment and engagement.

 

All of this continues to drive the rise of DC Master Trusts, whose membership has risen by 65%, and assets by 140%, in just two years. The majority of these inflows have been to the larger Master Trusts.

  The rise of Master Trusts

  2020 2018
Members 16.6 million

10 million

Assets Under Management

£38.5 billion

£16 billion

No. of Master Trusts

37

90

Source: TPR annual DC Trust report, February 2020

What are Master Trusts?
 

In constitution, a Master Trust is the same as any other trust based pension scheme. The difference is that it is structured to look after pension savings sponsored by different employers, each with their own section within the Master Trust.

Trustees are generally independent of the Master Trust provider. Although governance and regulatory responsibilities sit with the trustees, participating employers retain the ability to make decisions about contributions and investments. 

Are all Master Trusts the same?
 

There are currently 37 authorised Master Trusts in the UK. All meet the TPR’s exacting requirements and are subject to the same rigorous ongoing scrutiny.

However, there are features that differentiate them. The largest DC Master Trusts in the UK market are provided by bulk market Auto Enrolment solution providers, employee benefit consultancies and insurers.

Some Master Trusts target larger schemes, so smaller employers may be restricted to using the bulk market Auto Enrolment solution providers, with less control and fewer options.  Those with more members may be able to access wider options through other Master Trust providers, including shared investment governance, more bespoke member communications and member access to financial education and wellbeing programmes.

In addition, the extent to which Master Trusts offer future proofing varies, with most tied to particular administrators and fund managers, while a small number operate a more openly structured model where providers can be changed to keep pace with evolving market needs.

 

 

Why choose a Master Trust?

Comfort that members’ pension savings will be managed within a framework of robust governance and strict regulation.

Ongoing control of contribution rates and options to bespoke communications.

Continue to offer employees the advantages of a trust based pension scheme.

Shared investment governance may be possible.

Outsource deferred member accounts to a reliable trust based arrangement.

Allow members access to drawdown direct from accounts.

Devolving services such as administration and accounting should have little or no impact on members, whilst delivering cost and time savings.

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