What’s happening in the Pension Master Trust market?
Ascot Lloyd recently announced its decision to exit the Master Trust market and it’s not alone. According to figures released by The Pensions Regulator, 38 Master Trusts have applied for authorisation from the 90 it was monitoring earlier this year – a significant drop in providers.
TPR now requires all master trusts in operation before 1 October 2018 to either pass their new standard or close.
Those wishing to remain in business were required to submit their application, along with a fee of £41,000, before 31 March 2019.
It’s possible that not all those who have applied for authorisation will make it either, so the choice in the market will further decrease, while those whose Master Trusts are closing will have a decision to make about where they want to move their workplace pension to.
What’s driven the change?
It’s important to remember that many Master Trusts originated because the market was asked to deal with a tidal wave of new pension scheme applications from large employers right down to one-man bands. In this environment it was inevitable that evolution would account for providers and only those with the best strategies would survive.
Wren Sterling’s own experience in the market told us that squeezed margins, set up and running cost and the sheer amount of time needed to be devoted to customer service meant the viability of the model was always questionable. In high profile cases, Now: Pensions has faced questions about its investment performance and NEST (which looks after 600,000 employers) has cost the government £1bn through its scheme set-up costs and a new contingent liability guarantee approved in January.
For many providers without a safety net to fall back on and limited new business to chase now that every company has staged (new ones still have to comply and set up a pension scheme of course) the appeal in the market for some has dropped while the costs have not.
What can employers do now?
However, Master Trusts remain affordable for employers and employees and guaranteeing acceptance has worked in the favour of many smaller employers who would not otherwise have been accepted.
Minimum contributions went up again in April to 8% (3% employer and 5% employee) so in theory there should be more money for Master Trust providers to invest and earn their charges from. If the businesses themselves become more profitable it’s reasonable to assume they will pass that on to improving customer service further.
If your scheme provider is closing it is obligated to inform you of who will be managing the scheme in the future and you have the opportunity to look elsewhere for an alternative arrangement if you’re not happy with it.
Wren Sterling’s experienced corporate advisers can guide you through the process of finding the right supplier and conducting an audit to make sure you’re compliant. As each scheme is different your responsibilities will change from one to the other.
Here are some of the features we will focus on:
- Cost to the employer
- Annual Management Charge to employees
- Administration (Payroll compatibility and straight though processing)
- Compliance (communication, record keeping)
- Fund selection range
- Fund performance
- Customer service levels
To discuss your workplace pension requirements, get in touch today.
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