The survey asked over 130 pensions professionals about the benefits, challenges and opportunities that master trusts offer:
When asked about what they considered to be the most important attribute of a master trust, the majority of respondents selected governance as the key feature.
The ability to consolidate legacy plans features as the second most important attribute, with 40% of the respondents highlighting this as key.
Respondents cited ‘charges’ and ‘quality of investment offerings’ (73% and 72% respectively) among the key attributes considered when selecting between different master trusts.
These were followed closely by ‘quality of administrative services’ and ‘quality of communications, education and support offered to members’.
Quality marks such as those provided by TPR or PLSA were considered to be less important relative to the other attributes when differentiating one master trust from another.
Tony Britton, head of DC Delegated Consulting Services at Aon Hewitt, said: “Master trusts have gained in popularity over the past few years due to the combination of professional governance and administration, consolidation of legacy arrangements, increased engagement, flexibility and communication that they offer for members.
“However, with over 100 master trusts believed to be in existence in the UK, there is increasing focus on the real feasibility of that number in the market. We hope that the latest government proposals could lead to a period of consolidation which will ultimately benefit schemes and their members, ensuring that savings are safeguarded.”
Concerns raised by the government and the industry regarding the high number of master trusts are also shared by the survey respondents. Over 72% believe that there are too many, with 57% of those concerned about the impact of the discontinuance of some funds on overall confidence in the pension system.
Milan Makhecha, principal at Aon Hewitt, said: “Our survey respondents believed that 89% of their members had limited or no interest in the structure of their DC provision, indicating that members rely on their employer to select the right structure. This goes hand in hand with the results of the Aon DC Survey 2016, which suggested that members trust their employer when it comes to pensions."
Many believe that master trusts could help address this issue of member engagement by focusing on their use of technology to communicate with members. 97% of the survey respondents answered that technology is ‘very important’ or ‘important’ within the design of a master trust; of these, almost half (48%) reported that technology would be a ‘key part’ of their decision-making.
Technology is valued by many pension schemes as an effective way of administering ongoing member communications and ensuring that members are kept up-to-date on information about their pension.
Tony Britton continued: “Technology solves many of the engagement and communication issues faced by schemes. By incorporating the latest technology tools, master trusts have the ability to become the desired DC option for many schemes who want to take advantage of their economies of scale, increased governance and administration.”
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