Seventy per cent of master trusts are “very confident” with the quality of data in their system, a survey by ITM has revealed.

In its survey of 57 master trusts, covering 100,000 employers, representing 1.3 million members, a further 20 per cent said they are confident in their data quality, and 10 per cent do not know but do have an audit plan.

ITM said it was “surprised” by the confidence shown in answering the question, noting that whilst the amount of data held by master trusts is not huge, whether data is accurate will depend on the quality of data at source.

“We know from our experience that some master trusts accept payroll data in good faith – however many individuals and employers providing this data do not have a full understanding of the impact of contribution data (as an example) on members’ pensions. Validation processes and the screening and filtering of data on receipt therefore need to be near-perfect to avoid integrity issues which will in turn create downstream challenges. Depending upon the model selected to undertake assessment, communications and contribution calculation we expected master trusts to demonstrate more varied confidence in data,” ITM said.

The survey also asked schemes whether they plan to merge or acquire a new scheme in the coming months, as a result of the new authorisation regime coming into effect. However, 60 per cent said they do not see themselves as consolidators; 30 per cent could see themselves consolidating in the next six months, and the remaining 10 per cent in the next one to two years. ITM said the response was “interesting”, but consolidation requires a specific skill set, and for some master trusts it could be seen as a distraction from building business organically.

However, the three main major growth areas master trusts expect to see in the next two to five years are consolidation of member pots, secondary market, and increased contributions. ITM believes the increasing contributions response reflects the upcoming 2019 minimum contribution increase for the auto-enrolled to 8 per cent.

“We are encouraged by the optimism for secondary market activity (i.e. the movement of existing schemes selected, most likely, at the time of AE staging) to new providers. Although ‘the market’ is only five years or so old, we have seen first-hand extensive improvement and innovation in both product and employer interaction and we note from our work that many employers are looking for simpler and highly automated provider interaction,” ITM stated.

The survey highlighted the growing trend for master trusts to appoint a professional trustee, with 100 per cent stating that they have an independent professional trustee on their trustee board, of which 90 per cent said they did not see this changing in the future.

In addition, ninety-two per cent of respondents said they were open for employers looking to auto-enrol their employees, and of those just 8 per cent of schemes said they were selective about the size of the employers.

Sixty per cent of master trusts are also in favour of a move to simplify the auto-enrolment charging basis. ITM described the result as a “revealing response”, noting that most schemes regard a move to a single basis points charge as clear and fair to all members.

“At present, the master trust market contains a myriad of charges from single bps charging with no employer or employee fee, through to set-up fees, monthly member fees, contribution charges, and annual employer fees, most with additional bps charges. Each model impacts on the member, dependent on personal contributions and level of savings,” ITM said.
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Commenting on the survey’s results, ITM Executive Chairman, Duncan Howorth said: “Master trusts have become the default vehicle for auto-enrolment in recent years, with some 10 million employees now saving through them. Our survey provides a picture of where trusts perceive challenges and opportunities following the completion of the five year staging process.”

During 2018, all master trusts will be required to seek authorisation from The Pensions Regulator. This authorisation will assess financial sustainability, governance, fit and proper status, systems and processes and business plans. “Not surprisingly, all master trusts see authorisation as a matter of priority and focus, but survey results also highlighted a number of operational challenges as the sector moves to handle high volumes – and in many cases, small employers,” Howorth added.

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