Master trusts could save schemes 20%

Defined contribution pension schemes moving to master trusts could see cost savings of up to 20 per cent, according to analysis by Hymans Robertson.

The consultancy said that prices have been cut as master trust providers look to drum up new business after being granted authorisation by The Pensions Regulator (TPR).

DC schemes have been urged to take advantage of the attractive pricing currently being offered as providers seek to fulfil their authorisation targets.

“As master trust authorisation completes, it is a significant milestone on the vehicle’s path to maturity,” said Hymans Robertson head of DC provider relations, Michael Ambery.

“With TPR’s stamp of approval, we’ve seen that providers are significantly lowering their prices as they work to reach the business targets they have set themselves.

“Any DC scheme which has previously recognised the merits of a move to a master trust should seriously consider whether now is the right time for a move."

TPR completed its DC master trust authorisation process earlier this month (5 November) when it authorised the Financial Conduct Authority Pension Plan and Salvus Master Trust, the 36th and 37th scheme to gain approval.

There are a total of 16 million savers in the authorised master trusts, which are now “better protected” due to the authorisation regime, according to the regulator.

Half of all employees who have been automatically enrolled into a pension are saving into a master trust.

“The benefits for a pension schemes of moving to a master trust are genuine,” Ambery continued. “Savings in terms of governance efficiencies and member administration bring real efficiencies to a company’s pension function, without sacrificing member security.

“But, while gaining these advantages, corporate sponsors need to ensure this competitive pricing also delivers the value and service they require for employees.

“They must also recognise the quality offered by a master trust provider in comparison to the value and quality of any current arrangement and make the right decision for their own scheme.”

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