As part of this process, the number of businesses expecting to have a master trust as their main DC pension scheme is set to more than double over the next three years - from 12% to 26%.
The survey of 190 organisations revealed that this growth is partly driven by schemes moving away from Single Employer Trusts and Group Personal Pension (GPP) contract-based pension schemes. These are set to decrease from 34% to 23% and 50% to 47% respectively.
David Bird, Head of Proposition Development, commented: “With the master trust market having experienced rapid growth since its inception, it is no surprise that the survey shows more organisations moving towards master trusts. However, we do anticipate more consolidation in the market now that the Pension Schemes Act is open. This is good news for prospective employers and members, as those master trusts left standing will be able to achieve the scale necessary to improve their offering to members.”
Overwhelming drivers for the review of pension delivery vehicles uncovered by the research are the desire to enhance communication and engagement (68%), and improve outcomes (60%). Under a third (31%) of respondents said that integrating pensions into a wider financial well-being programme was a driver for them.
Conversely, costs involved with the change are the main barrier to changing an organisation’s DC pensions vehicle for just under half (43%) of organisations. Further barriers include the internal resource (time) required (43%) and lack of clarity (41%) around the benefits, or insufficient benefits from a change, compared to the current provision.
Bird continued: “The desire for better member communication and outcomes is something that our research encouragingly reveals is a key motivating factor behind organisations’ decision to review their DC pension delivery vehicle. For those organisations looking to switch to a master trust, focus should be on the strength and quality of governance and management of those trusts under consideration.”
LifeSight, Willis Tower Watson’s DC master trust.
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