DB master trust pension schemes are increasingly popular as DB schemes face the combined pressures of rising costs, extra complexity and a growing governance burden.
A DB master trust combines many schemes under one trust to provide individual schemes the benefits of scale and professional expertise. Each scheme is ring-fenced and the sponsor continues to pay contributions with high-level oversight. DB Master trusts could help DB schemes achieve self-sufficiency faster by improving governance, providing better investment options and reducing costs compared with remaining as a standalone scheme. Depending on a DB scheme’s circumstances, a DB master trust can also support it on the path to buyout by reducing risk so that the scheme can transfer liabilities to an insurer. The trustees of a good DB master trust will work with the scheme’s sponsor to decide on the best approach to secure members’ benefits.
In this video, Mercer’s Andrew Ward talks in more detail about how a DB master trust can help DB schemes achieve their endgame.
Can the trustees help me set or review my endgame? - Video transcript
Q1: Can the trustees help me set or review my endgame?
Yes. If you have not already set your endgame, the trustee of a good Master Trust will work with the scheme sponsor to decide whether buyout or run off is the most appropriate approach for your scheme.
And if you already have an endgame in place, moving to a Master Trust should provide an opportunity, should you wish, to revisit your plans in light of the opportunities that being part of the Master Trust may present your scheme.
Q2: How could a Master Trust accelerate my path to buyout?
The answer won’t be the same for all Master Trusts, but, as an example, schemes entering the Mercer DB Master Trust will benefit from both the Mercer Fiduciary Management Team’s experience of setting and monitoring de-risking triggers and will also have Mercer’s Risk Transfer Team at their disposal.
Our Master Trust also works with an insurer specialising in small section buyouts. This is key for smaller schemes as they can often struggle to get quotes.
Finally, a benefit specification is produced as part of the on-boarding process of a good Master Trust. This can be used to obtain initial quotes from insurers, saving time and resource.
Q3: How could a Master Trust help me achieve run-off?
Again, the specifics will differ between Master Trusts but generally, improved governance and the potential to access a broader range of investment asset classes, at a possibly lower cost, could mean you achieve your goal of self-sufficiency faster and more effectively than would otherwise be the case.
For schemes entering the Mercer DB Master Trust, daily monitoring by our Fiduciary Management Team, streamlined journey planning and de-risking to your end game target are all included as standard.
In summary
The right DB master trust brings together a range of pension expertise with the pooled buying power and journey planning sophistication of a fiduciary management platform, increased governance and broader investment options, all of which mean your scheme could achieve its endgame faster and more efficiently than it may be able to do on its own.
Wherever your defined benefit pension scheme is on its journey, a DB master trust can set, refine or deliver your endgame.
Andrew Ward - Head of Risk Transfer, Mercer
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