By Shabna Islam, Head of DC Provider Relations at Hymans Robertson
1. Current attractive charges
One of the main drivers for moving to a Master Trust is to benefit from significant cost savings. Increased competition in the market and significant growth in assets has resulted in pricing reducing even further – recent reviews have seen pricing savings for members moving to a Master Trust by as much as 50%.
As demand continues to increase, we can’t be certain whether this attractive pricing will continue in the long term, or if it is only a temporary phenomenon. We recommend testing the market now to see how much you could potentially save in the current climate – we can give you an indicative quote based on high-level scheme information free of charge!
If you’re already in a Master Trust arrangement, you should review your provider every year, or at least every three years. Even if it was reviewed 12 months ago, it’s worth looking at the market again to check you’re still maximising value.
2. Get your pick of the bunch
The last few years have seen a remarkable growth in demand for DC Master Trusts and we’re already seeing an increase in activity following the regulators drive on consolidation of trust-based schemes smaller than £100m of assets. This growth is only set to continue. By 2026, the Master Trust share of the workplace pensions market is expected to grow from £80bn today to £400bn.
With this growth in demand, Master Trust providers could get more selective about which employers they accept to participate. Moving now will ensure you get your pick of the bunch at a time when they are all still hungry for new business. Since March 2020 the market has seen an additional £5bn of assets committed to Master Trusts in favour of enhancing member experience and functionality for employers and reducing costs.
3. Combine with other planned changes
You may already be thinking of making changes to your scheme based on recent trends and regulatory changes, for example in response to an increasing responsible investment/ESG focus. Maximise efficiency by making these changes in conjunction with a move to a Master Trust arrangement – many providers can offer an off-the-shelf solution to meet your needs, incorporating ESG factors as standard.
Delaying the move to a Master Trust could mean additional regulations are introduced and new DC structures are considered as part of the change. It is currently relatively straightforward and not contentious to change from a DC scheme to a DC Master Trust. However, as time moves on new regulations and solutions can develop in the workplace place, e.g. Collective Defined Contribution solutions, which can make the change challenging.
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