New research from Barnett Waddingham (BW) reveals that while more large pension schemes are consolidating into master trusts, own-trust schemes continue to have the edge when it comes to member engagement, investment choice and digital interaction.
The shifting large scheme market
The annual “Analysis of large defined contribution (DC) schemes” report, now in its fifth year, analyses 122 of the UK’s largest defined contribution pension schemes covering a combined £157 billion in assets.
It reveals that, while the combined total of bundled and unbundled own-trust schemes (39%) still exceeds the number of large schemes within master trust sections (34%), the proportion of schemes with over £1bn now in master trusts has increased to 40% – matching the number of own-trust schemes at this scale for the first time.
The trend reflects an evolving market: with master trusts no longer seen just as a home for consolidating smaller or struggling schemes, but being increasingly used by large organisations managing substantial assets and tens of thousands of members.
This movement comes at a time where average charges for master trust default investment strategies have fallen to just 0.21% – the lowest of any scheme type and on par with average off-the-shelf default charges across the research. But while this brings cost efficiency, the difference in engagement patterns shows that low charges alone don’t always guarantee better value for members.
Own-trust schemes delivering slightly stronger member engagement
Specifically, BW’s data shows that large own-trust schemes have a notably higher proportion of assets invested in self-select funds (26%) compared to those in master trusts (16%), suggesting that people within these schemes feel more confident - or better supported - to make the decision to move out of a default strategy.
Most notably, when looking at engagement across a sub-section of 33 large schemes, own-trust schemes continue to edge higher than their master trust counterparts. While around 47% of members across all schemes sought advice at the point of retirement, this rose to 48% in own-trust schemes, compared to 46% in master trusts.
Own-trust schemes also saw stronger online engagement, reporting higher rates of portal and app usage as members logged in to check their pot sizes and interact with their savings. Lastly, even in practical areas like expression of wish forms – a basic but crucial planning step – own-trust schemes led the way, with three of the four top-performing schemes in this area being own-trust arrangements.
It may be that these elevated engagement levels reflect the knowledge of membership within own-trust arrangements by trustees and sponsors. If so, this underscores the importance for organisations transitioning to master trusts to establish an internal governance framework that maintains a link to the specific characteristics of each master trust section and supports the development of an effective engagement strategy.
Mark Futcher, Head of DC at BW, said: “Pension reform is firmly on the government’s agenda, with the Mansion House compact and Pension Schemes Bill both encouraging large-scale consolidation. Master trusts have already helped to deliver real improvements for businesses, both in terms of price and operational efficiency - and they will continue to play an important role in the years to come.
“But as more employers weigh up whether to move into a master trust, it’s crucial they don’t mistake cost-cutting for value. Our research shows that many own-trust pension schemes – particularly those run by larger employers – are also continuing to deliver exceptional value, especially when it comes to member engagement, digital interaction and at-retirement decision making.
“The right solution will look different for every business and in a system moving rapidly toward scale, trustees and employers have a real responsibility to ask: what will drive better outcomes for our people? In this environment, choosing the right structure isn’t just an operational decision – it’s a meaningful commitment to the futures of millions of savers.”
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