Master Trust Market Insight

In the past five years the UK's pension landscape appears to have embraced the old adage that 'the only constant is change'. While the goal of achieving the best possible member outcomes has remained, with almost annual changes to regulation and pension options, it's starting to feel like the playing field is continually shifting underfoot. The government has introduced auto-enrolment, more defined contribution (DC) scheme governance requirements, charge caps and new pension freedoms, with the stated intention of helping individual members find their unique path to the best possible retirement outcomes.

While the intentions appear good and the theory seems sound - increasing options can generally lead to greater opportunity - these actions have also led to governance, investment and administrative challenges. And, for trustbased schemes, it has led to financial pressures and difficulties associated with greater choice for members. It is against this backdrop that master trusts are emerging as a stable vehicle for DC provision and are increasing in popularity. And, why not? Master trusts offer a compelling combination of professional governance and administration, investment options, improved member engagement tools, flexibility, and communication for members - thanks, in part, to embracing new technology. They also use economies of scale to help keep costs down.

But, with over 100 master trusts now in existence in the UK, there is increasing focus on the sustainability of the market. Many expect a period of consolidation in the coming years, which poses questions around the security of members' benefits. Governance of master trusts is under scrutiny, too. It is therefore no surprise that the government has proposed new legislation covering the authorisation and supervision of master trusts in the recent Pension Schemes Bill.

In light of all this, Aon undertook a survey of over 130 pension trustees, managers and employers to gain a better understanding of what they see as the benefits, challenges and opportunities of master trusts. By really understanding the wants and needs of those considering a master trust, we can make certain that the market evolves so that today's DC savers are well positioned for positive retirement outcomes in future. We hope that you will agree that this is a timely report, providing some helpful insights and analysis.

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