A new study into master trusts has found that although they have focused on administration, communication and governance, investment design is much less a priority.

The research, Master Trust Investment Designs: A Comprehensive Study was commissioned by the Defined Contribution Investment Forum and undertaken by independent consultant Nico Aspinall. Seventeen master trusts were asked about their current investment design strategies and the issues currently facing them.

It found that, although evolving rapidly, master trusts are still in the early stages of development. As a result, it appears that many have not looked into investment design or value for money, and what that means.

In terms of investment, the report calls for an increased focus on offering innovative and modern default investment solutions to ensure that they are achieving the best possible outcomes for members. With almost half (49 per cent) of people auto-enrolled in company pension schemes put into master trust schemes, the report also calls for more clarity and support from the industry’s regulators in this area.

In addition, the report noted that factors such as the charge cap are influencing investment strategies and it may be influential in pushing master trusts towards cheaper solutions, which may not add as much value as their actively managed counterparts.

Commenting on the findings of the study, DCIF executive director Louise Farrand said: “The DCIF believes that an effective investment strategy is fundamental to the success of a pension scheme and ultimately results in better retirements for members. Whilst it is very early days for both master trusts and the auto-enrolment process, we want investment to become a more competitive feature in the future and are very keen to be part of this process.

“The report also shows that value for money is an important issue. We therefore hope that prospective investment returns, and the suitability of risks taken for each group of members, will feature more prominently in the future.”

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