By Michael Ambery, Head of DC Provider Relations at Hymans Robertson
1. Competitive pricing
The authorisation process for Master Trusts has sparked a race for providers to grow their assets and membership. As a result, pricing has become more competitive - recent reviews have seen pricing reduced by as much as 20% in the last 3 months.
2. Benefit from improvements in tools & technology
To get DC scheme members saving more effectively, trustees and employers need to develop a communication strategy that is consistent, results driven and most importantly, genuinely engaging. Tools and technology have an increasing role to play in this, e.g. through video statements and mobile apps to make saving easier. Master trusts have made significant investments in improving technology and communications in recent months to offer best-in-class member engagement strategies.
3. Reduce the increasing governance burden
A review of your current governance arrangements might reveal that your Trust governance costs too much time or doesn’t achieve what you might want it to. A switch to a Master Trust can reduce some of the burden, for example Chair’s Statements are delivered through the provider. This frees up time for HRDs, FDs and the company to focus on strategy and design, not on operational and regulatory matters (although you can still retain some oversight if preferred!).
4. Meet changing requirements on default investment funds
Over the past year, we’ve seen dramatic changes to default investment funds. The addition of Responsible Investment and climate change considerations have been key reasons for review, as well as adapting to Freedom and Choice. Now is a good time to challenge the performance of your investment default fund in light of these trends and consider whether alternative solutions may deliver better outcomes. Read our latest Master Trust Default Performance Review to compare the investment performance across the biggest providers’ default funds and benchmark against your current arrangements.
In addition, Master Trusts offer a more joined up ‘to and through’ retirement solution, whereby individuals can seamlessly transition and remain invested from accumulation to decumulation without incurring the cost of transferring between vehicles – this is often a very attractive offering to new, and existing employees.
5. Offer an attractive savings package
The importance of pension arrangements against the backdrop of other savings products is a major workforce planning focus. For example do the workforce value saving for retirement more than saving for a home or removing debt. This focus often prompts a review of current savings options and Master Trust providers can also offer broader savings and wellbeing options on the same platform in order to engage the workforce.
Time to review?
While the move to Master Trust won’t be right for all, 2020 offers a rare time to review pension scheme design and pricing in an era of very hungry providers looking to win work at low cost. If you do decide to consider the move, it’s vital that you carefully assess and select the provider that will best serve your needs - getting the right support and advice is paramount to success and good member outcomes
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