×
First-time login tip: If you're a REBA Member, you'll need to reset your password the first time you login.
22 Oct 2020
by Sharon Bellingham

How modern master trusts can provide employees a robust alternative pensions provision

Over the last ten years, master trusts have shifted from being a niche product to a mass market pensions solution. And there is still more exponential growth to come, with assets under management expected to reach in excess of £424bn before the decade is out.

CF3D-1607678426_SharonBellinghamMAIN.jpg

The march away from defined contribution (DC) single-employer trust arrangements towards a fully outsourced master trust model is already in progress. There has been significant movement across the last decade, from just over 4,500 employer trust-based schemes during 2010 to the current position of around 1,740* schemes.

The Pensions Regulator has a stated ambition to shift smaller, poorly governed DC schemes into master trusts but we see a ripple effect across the whole market, with modern master trusts offering a compelling solution for many employers and their people. The stringent Master Trust Authorisation regime has removed any previous uncertainty about the security, sustainability and robustness of the market. Authorisation has pretty much achieved what it set out to do, with the outcome being greater consumer protection and much needed market consolidation.

Why a master trust?
Master trusts enjoy economies of scale, and their future growth potential makes them ideally placed to lead the way in delivering genuine innovation. We are already seeing significant investment and development in areas such as responsible investment, technology and communication. Employers can capitalise on this and offer a modern, market-leading solution for their staff.

Investment
Sustainable and responsible investment is fast becoming a differentiator for master trusts. As well as providing opportunity to deliver long-term returns, it can help to engage members with their savings. Wider research shows that many savers are engaging in pensions more than ever before and asking questions about how their money is invested.

Wider financial wellbeing
One key concern for employers is whether their employees are planning sufficiently for retirement. Many of us are unsure of how much we need to save for the future and member engagement and financial education plays a crucial role in addressing this widespread problem. An increasing number of master trusts offer ancillary benefits and financial wellbeing solutions and taking an holistic approach allows pensions to be considered as a piece of a broader savings and financial wellbeing jigsaw.

In moving to a master trust, employers still expect a high-quality solution that provides excellent value both for the business and for its people. The relationship between the employer and the master trust is critical and it’s crucial that businesses give time and due consideration to selecting the most appropriate provider partner, especially as moving pensions schemes can be complex and disruptive.

The Covid-19 pandemic has put many businesses under significant financial pressure, and that could heighten the pace of change towards using master trusts in place of employer-based DC trusts.

Making this move provides a robust and compelling alternative solution for members, and enables employers to make savings on their pension provision relatively quickly.

The modern master trust is firmly established as a credible and sustainable solution. There is still work to be done, but I believe that we can confidently enter the next decade in decent shape, with a focus on creating richer member-centric experiences which will make a positive difference to retirement outcomes. 

The author is Sharon Bellingham master trust lead at Scottish Widows.

This article features in the Pensions and Master Trusts Research 2020. View the full report findings.

*schemes with 12 or more DC members - this includes DB/DC hybrid arrangements.

In partnership with Scottish Widows

Scottish Widows is a life, pensions and investment company.

Contact us today