REBA & Corporate Adviser Report: Master Trust and GPP Defaults performance


This report highlights the different approaches of the many providers operating in the DC pensions sector. The performance tables are particularly eye-catching, highlighting some significant differences in returns delivered over five years. The risk taken to achieve these returns has also been considered. Of course these tables are backward-looking and are only a limited guide to the future. Q1 2020 figures are, as a result of the devastating impact of the coronavirus pandemic, likely to look very different, as the small sample of post-crash data we collected shows. And pensions are long-term obligations. Topping the tables over a five-year period is not of itself an absolute guarantee of quality. But the presentation of performance data for all known schemes does highlight outlier behaviour that trustees, IGCs and employers should reflect upon. It should also provoke debate about how the DC sector can deliver the best possible outcomes to the nation’s savers.


Debi O'Donovan

Debi O'Donovan

Co-founder & Director

John Greenwood


Emma Simon

Deputy Editor

Key findings

• The master trust sector is predicted to grow to £200bn by 2025, and around £340bn by 2030
• Scale is being achieved very quickly. The total assets in the 25 master trust defaults in our survey grew by more than 50 per cent in 9 months, from £36bn to over £55bn. The combined assets of master trust and GPP defaults in this report totalled£89bn as at 31.12.19
• £1bn-plus providers expect their assets to grow by between 1.8 times and 9 times by 2025, without acquiring any new employer clients. Several expect a five-fold increase by 2025, and one expects to grow by a factor of 10.
• At least six schemes are expected to have assets in excess of £10bn by 2025, of which three will have more than £20bn
• Derisking periods range from 42 years from SPA to four years from SPA. Some schemes operate no formal derisking at all
• The ratio of active to deferred members has changed from 11:5 to 12:10 in just nine months. Big providers now have more deferred members than active ones
• Auto-enrolment default funds enjoyed extremely strong performance in the period running up to the end of 2019 (the period covered by the data in this report). Growth phase investors enjoyed an average return in 2019 of 18.9 per cent.
3-year annualised returns were 8 per cent, 5-year were 9.2 per cent. But the gap between top and bottom providers is wide
• Investors 5-years pre-retirement enjoyed 13.9 per cent returns in 2019, with 3-year returns of 6.2 per cent and 5-year of 7.6 per cent • Investors 1 day to SPA saw returns of 8.5, 4 and 4.7 per cent respectively for 1,3 and 5 years to 31.12.19
• Early data shows the coronavirus crash has wiped out much of the strong gains of the last five years. Higher risk providers have suffered bigger losses than low-risk ones
• The average growth phase default holds 75.3 per cent of their assets in equities. For investors 5 years from SPA, equity allocation averages 44.7 per cent.
• Five master trusts invest in infrastructure, and one more is considering introducing it. This compares to three last year. Some providers are now targeting a 30 per cent exposure to illiquids
• BlackRock is the most widely used asset manager, used by more than half of the master trusts and GPPs in the survey
• As they achieve scale, master trusts and GPP providers are increasingly looking at investing directly in markets, potentially by-passing asset managers
• Master trust and GPP defaults are increasingly adopting ESG strategies
• In-scheme drawdown is now common amongst master trusts

About the authors

John Greenwood is editor of Corporate Adviser and has been writing about workplace pensions for 20 years. A winner of multiple industry awards for his journalism, he was formerly deputy personal finance editor at the Sunday Telegraph, prior to which he was deputy editor of Money Marketing.
John is a qualified solicitor and practiced civil law for five years prior to training as a journalist. He is the author of the FT Guide to Pensions and Wealth in Retirement and has written about pensions and personal finance on a freelance basis for several national media publications.
Emma Simon
is deputy editor of Corporate Adviser. She has over 14 years’ experience at Telegraph Media Group, where she was deputy personal finance editor of the Sunday Telegraph. She has also worked for the Press Association and Insurance Age. She has a first class degree in English Language and Literature.