Nearly a third of advisers (31%) think mastertrusts are preferable to insurers for auto enrolment but over half (52%) are uncertain, indicating a potential knowledge gap, according to new research conducted by independent financial product research company Defaqto on behalf of NOW: Pensions.
Of the 264 advisers questioned, just 17% say they favour insurers but the majority say they “don’t know” whether mastertrusts are favourable to insurers for auto enrolment.
Of those that prefer mastertrusts, the reasons given were:
- 77% think the structure enables even small employers to benefit from high standards of governance
- 70% say the independent board of trustees at mastertrusts ensure that the scheme is being run in the best interests of members at all times
- 65% say mastertrusts ensure that scheme governance is robust but costs are kept low
- 55% say that within mastertrusts all members are treated equally – whether active or deferred
- 47% consider mastertrusts be to generally more cost effective
Of those that favour insurers, the main reason given, cited by 69% of advisers, is ease of implementation as many clients have existing schemes in place with insurers which they can extend to the rest of their workforce. Other reasons given are greater fund choice (56%) and brand recognition (56%).
Morten Nilsson, CEO, NOW: Pensions said: “Mastertrusts have an important role to play in the auto enrolment market and advisers are right to highlight the fact that the structure can provide high standards of governance at a low cost. But, not all mastertrusts are the same and advisers need to make sure the mastertrust they select for their clients is robust and fit for purpose.”
Nilsson continues: “The NAPF’s PQM READY standard is a good benchmark of quality as it identifies mastertrusts that are well governed with low charges and good communications. The Pensions Regulator is also currently looking at ways to ensure consistent standards across all mastertrusts.”
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