Finding the best fit for your pension scheme members

Historically, it’s fair to say the DC master trust market could be a bit of a minefield, with vast differences in approach and capability often being demonstrated. The master trust authorisation framework has gone some way to helping with this, but with over 30 authorised schemes to choose from and the majority of assets in the master trust market sitting with a handful of providers, some may dismiss the remaining chasing pack when there could be a better fit for their membership.

In some instances, it’s right to focus on the big master trusts as they provide value through economies of scale. However, there is also some strong competition from other master trusts in the market, which should be considered as they may just suit you and your members.

What is important is to understand what you want from your new long-term partner (a much better way to think of them than as simply a “pension provider”).

With these providers/partners taking a variety of different approaches to pension and workplace savings, price can’t be used as the only differentiator when it comes to determining the best fit for your pension scheme members.

So, what else should you think about?

Certainly consider the fundamentals: Typically, the suitability of a provider is also determined by their default investment strategy and attitude to risk, alternative investment options, administration capability and track record, their online capability for both employees and employers along with a number of other factors.

What’s in a name?: Some of the master trust providers in the market also aren’t typical household names which members are familiar with. This can be a double-edged sword. A household name brings confidence and scale, but often comes with standardisation.

But don’t forget the nuances: It is important to get the above factors right, but you have the opportunity to tailor the scheme to your membership. What about cultural fit? Tools specific to your membership’s needs?

So, what’s the state of play in the market?

With the increased amount of governance required to maintain a single employer trust-based pension arrangement, a number of companies and trustees are now looking at the master trust market as part of their ongoing governance and oversight of their pension arrangements.

The motivation for this can be to improve member outcomes or reduce employer costs/risk. A well-run provider selection exercise can achieve both goals at once.

What we are seeing is a need for clear, expert support through this process.

Once a decision has been made to review the market, a trustee board or governance committee must decide on their objectives for the provider selection exercise and outline what they are looking for in a new scheme. This is an important step in the review process, as it will help with narrowing down the long list of master trusts to those who have been identified as best being able to help meet those objectives.

Punter Southall Aspire’s dedicated Provider Research Group spends a considerable amount of time and resource researching, evaluating, and assessing the capabilities of UK pension providers to understand the strengths of their propositions.

Our review process considers all providers in the market and undertakes a thorough review of those we identify as being appropriate for our clients. This research ensures we collect all the relevant information and data on each relevant provider in the market, who are then scored based on the value they’re providing to members as well as to the employer.

The research and experience we have gathered, both on the ongoing value being delivered and the implementation journey with each provider, will be a useful insight into what you can expect beyond the selection exercise.

We are truly independent, with no master trust or administration services being operated alongside our consultancy practice, and so we’re able to help navigate this competitive market and help our clients find the right fit for them.

If you’d like to talk to our expert team about the support we can provide you in sourcing an appropriate master trust, please get in touch.