The new master trust regulatory regime, which is expected to bring consolidation to the market, will lead to better member engagement in the future, according to one expert.
Speaking to Pensions Age, Willis Towers Watson, Lifesight head of proposition development, David Bird, believes that with fewer participants in the market, economies of scale will development allowing for greater investment in member engagement.
“The members will be much better served because they will be in bigger schemes, which can generate, economies of scale…and we should be able to improve the member experience of this,” he said.
He believes that in the past defined contribution pension schemes have not served their members very well, because they haven’t properly engaged with their members. He noted they are “very distant” from their members because they aren’t the ones who generally makes decisions about buying them.
Bird said that improving engagement of DC scheme members has long been talked about, but never improved, because the incentive hasn’t been there. However, the consolidation of the market will lead to a change, he said.
“I think one of the things that we will see as a result of this is because there will be bigger schemes [after consolidation] they will have bigger resources to actually engage properly with those people.”
Bird welcomes the master trust consultation because he has wanted more regulation in the area “to make sure that participants are better regulated”, and to prevent any embarrassment to the sector in the future.
He also said that there are a number of schemes that are willing to take on the members of schemes that decide to wind-up. However, he has concerns in relation to data when transferring members, and whether a scheme that takes on the members is penalised.
“One thing the industry has been asking for is some kind of safe harbour, particularly in relation to data. If the transferring scheme has got poor data, that means it’s actually quite hard to fulfil the authorisation regime for the scheme that takes over, then it causes a bit of a barrier to that consolidation.
“A scheme taking over that scheme [with poor data] will not make that data worse but it may not be able to repair any holes.”