Aegon not interested in scooping up failed mastertrusts

Speaking to Pensions Expert, new chief distribution officer Ronnie Taylor predicted the company's own mastertrust would not be alone in chasing the assets of large UK corporates over struggling multi-employer schemes, citing costs as a key motivation.

Brought in by the Pension Schemes Act 2017, mastertrust authorisation and supervision will allow the Pensions Regulator to drive up governance standards in the sector and shrink the number of participants to a manageable size.

Someone is going to have to look after those members, so we need a safe haven for them

Ronnie Taylor, Aegon

While no mastertrust has yet been wound up without a buyer found, some experts have expressed concerns that members might be left in a ‘stranded’ scheme, where the cost of righting historical errors makes acquisition unappealing.

For Taylor, that potential for cleaning up past administrative mistakes does not even factor into the decision.

“We don’t have an interest in the small mastertrusts… whether or not they get authorised,” he said. After authorisation, the company will focus on working with employee benefit consultancies to secure large corporate clients, which may have defined benefit schemes and single-trust DC arrangements.

DB assets a juicier target

Taylor said providers would see the £1.6tn in DB schemes as an indication of the value of securing large companies’ contributions. By comparison, the DC market was estimated at £338bn in 2016 by Broadridge Financial Solutions.

“I wouldn’t automatically assume that everybody will swoop on the small mastertrusts,” he added. “If you have a large number of mastertrusts that don’t go through authorisation… someone is going to have to look after those members, so we need a safe haven for them.”

A spokesperson for the regulator said it was monitoring the market carefully and providing support for schemes exiting the market, but did not say whether it had a contingency plan for disorderly wind-ups.

“All the evidence we are seeing is that there is a healthy consolidation market from a wide range of mastertrusts who are actively taking on mastertrusts which are choosing to exit before authorisation commences,” the spokesperson continued. “We have found no evidence of schemes being unable to find another provider to take them on.”

Smaller providers hungry

Certainly, there are those in the market who have expressed an appetite for acquiring new mastertrust business.

“We’ve got half a dozen active conversations at various different stages, talking to mastertrusts who are 99 per cent sure that they don’t want to go through the authorisation process, and therefore quite rightly are looking for an orderly move out,” said Smart Pension’s director of business development Paul Budgen.

However, he said that while he has not come across any schemes with insurmountable problems, record-keeping and data would be key commercial considerations.

“If it’s too difficult to get the data across or if it’s not got enough records, then we do have to take a view on how much it’s going to cost us,” he said.

Regulator can support transfers

If a buyer cannot be found, assurances that receiving schemes will not immediately be punished for legacy problems from the regulator could be needed to smooth deals, according to Tim Smith, professional support lawyer at Herbert Smith Freehills.

He predicted that large mastertrusts may collaborate by taking on a share of otherwise unattractive transfers, for the purpose of upholding the sector’s reputation.

However, Budgen said the chances of companies acting against their commercial interests are “pretty remote”.