Businesses turning to master trusts as their main defined contribution pension scheme will double in the next three years as they look to enhance communication and improve outcomes.
A survey of 190 organisations by Lifesight, a Willis Towers Watson run master trust, found that businesses who expect to have a master trust as their main scheme will rise from 12 per cent to 26 per cent to 2021.
The drivers for the switch were to enhance communication (68 per cent) and to improve member outcomes (60 per cent), while 31 per cent said the key driver was the integration of pensions into a wider financial well-being piece.
Lifesight head of proposition development, David Bird, said: “With the master trust market having experienced rapid growth since its inception, it is no surprise that the survey shows more organisations moving towards master trusts.
“This is good news for prospective employers and members, as those master trusts left standing will be able to achieve the scale necessary to improve their offering to members.”
According to the survey, the growth in master trusts is partly due to schemes moving away from contract-based schemes, such as single employer trusts and group personal pensions, set to decrease from 34 per cent to 23 per cent and 50 per cent to 47 per cent, respectively.
Bird added: “The desire for better member communication and outcomes is something that our research encouragingly reveals is a key motivating factor behind organisations’ decision to review their DC pension delivery vehicle.
“For those organisations looking to switch to a master trust, focus should be on the strength and quality of governance and management of those trusts under consideration.”
However, barriers to changing vehicles still remain, with 43 per cent of schemes earmarking cost, while 43 per cent say internal resource time and 41 per cent say lack of clarity around benefits is their main reason for not converting.
Around 30 master trusts are exiting or are expected to exit the market as new legislation around the fit and proper running of master trusts comes into force on 1 October 2018.
Master trusts now have six months to apply to The Pensions Regulator for authorisation, to meet new standards around holding sufficient financial reserves and robust systems and adequate plans in place to operate in the market.
The latest figures mean that there are now 58 schemes which will either apply for authorisation or exit the market over the next six months.