PMI report predicts just 20 master trusts in five years’ time

A new PMI working party – including members from Atlas Master Trust, BlueSky, Eversheds Sutherland, Smart Pension, Scottish Widows, Pinsent Masons, and Now Pensions – conducted a survey of 15 major institutions with a master trust offering, on their current thinking around regulation, costs, system limitations and skills.

We expected the introduction of authorisation to drive consolidation of the market, and we see evidence of this continuing

The Pensions Regulator

Eighty-seven per cent of participants said that they felt authorisation would accelerate consolidation and collaboration.

PMI’s research also highlighted that 60 per cent of participants believed there will be no more than 20 master trusts in five years, with 20 per cent expecting the number to be 25-30, and 13 per cent predicting there will be 40 in five years.

Authorisation and collaboration

All the respondents overwhelmingly agreed (93 per cent strongly agreed, 7 per cent agreed) that the master trust authorisation regime was a ‘good thing’.

Respondents questioned the level of the Pensions Regulator’s supervision and how prescriptive it may become. Twenty-seven per cent of respondents expressed preference for a more principles-based approach, while 73 per cent were content with the watchdog’s detailed approach.

When asked about the level of advice and guidance needed, 53 per cent agreed that rules around advice and guidance impede the current and future delivery of services to members. Also, almost half of respondents claim the regulations impact effective member communications.

DC skills

The research also identified areas for further improvement, notably skills within defined contribution.

Almost one third of those surveyed said trustees do not possess the right balance of commercial and DC experience required at a master trust. One anonymous comment in the report highlighted trustees as “male, pale and stale with a DB bias”.

The problem is thought to be industry-wide, as 73 per cent of respondents said there is a shortage of DC skills at the regulator.

Lesley Carline, president at the PMI, said:“Our report has shown that the growing master trust sector must overcome significant obstacles if it wants to offer good service delivery for members.”

The regulator, in its December master trust report, stated that it has identified 90 master trusts in the market, and as at 30 November it has received one application for authorisation.

“We expected the introduction of authorisation to drive consolidation of the market, and we see evidence of this continuing,” it said.

The regulator added: “Three schemes have exited the master trust market so far, and a further 32 have notified us of a triggering event to exit the market, and will transfer their members to an alternative master trust scheme or other appropriate vehicle. We expect the remaining 54 master trust schemes to either apply for authorisation or trigger their exit from the market in the coming months.”