On the go: One in three trust-based defined contribution arrangements expects to transfer members into a master trust over the next five years, with stakeholders citing the drain on time and resources of running an own-trust solution.
The findings, revealed in a survey by consultancy Aon, reflect an increasing compliance burden for DC scheme trustees in particular, as the Pensions Regulator seeks to improve standards in the sector.
A TPR consultation launched in February detailed the watchdog’s plans to test trustee knowledge and understanding, with consolidation one of the avenues it will pursue if its expectations are not met.
But the industry appears to be one step ahead, with almost 30 per cent of respondents saying they envisage transferring to a master trust within five years. A similar finding was observed in respondents using contract-based arrangements, where one in five plan to move to a master trust.
For those currently in an own-trust arrangement, the most common reasons given for this move was the time and resources needed to operate a DC plan, cited by 40 per cent of respondents. A further 19 per cent blamed governance requirements and 14 per cent mentioned operational costs, while another 14 per cent said the new structure would improve members’ outcomes.
Users of contract-based plans gave different reasons, with improved member outcomes the most common motivation.
Joanna Sharples, partner and head of the DC investment proposition at Aon, said consolidation “has really picked up a bit of pace in the past few years, particularly with the master trust authorisation being completed”.
According to Aon, the regulator is also beginning to direct resources previously aimed at completing master trust authorisation towards single-employer trusts, aiming to drive up their standards on an informal basis.
“Anecdotally, we’re starting to hear things about the regulator stepping up some of the supervision of DC schemes,” Ms Sharples said.
