All respondents either agree (7%) or strongly agree (93%) that the master trust authorisation regime is a positive development, according to research conducted by a working party of eight organisations and the Pensions Management Institute (PMI).
The PMI master trust report: working collaboratively to overcome barriers to good service delivery, published on 5 December 2018, collated the views of master trusts on 18 questions surrounding the issues and barriers facing the industry, asked during July and August 2018.
Lesley Carline, president at the PMI, said: “There are, and there always will be, barriers to good service delivery. The overarching thing that came out of the report was that yes there are barriers, but what we want as an industry is to work collaboratively to overcome those barriers, whether it’s skills, governance, regulation or technology.”
Graham Peacock, head of proposition, workplace savings at Scottish Widows, added: “We are committed to developing this space as a provider ourselves. Master trusts seem to be the direction of travel in workplace pensions.”
More than half (53%) agree that the rules surrounding financial advice versus financial guidance impede both the current and future delivery of master trust services to members, while 47% feel that the regulations negatively impact effective member communications.
“It’s legislation that is in place to protect the member, but it is hampering providers [that] are looking to use technology to enhance the member experience,” said Carline. “It’s all well and good empowering members, but they need the right tools.”
The working party found that 53% of providers believed that industry-wide collaborative developments, such as the pensions dashboard, will help drive the adoption of technology among master trusts.
Almost two-thirds (60%) say that insufficient system integration and technology is a key barrier to good member outcomes. However, 73% of master trust providers state that current systems limit their ability to bring in new technology, while 80% feel that they are restrained by cost.
Further barriers facing master trusts include the fact that trustees do not possess the balance of commercial and defined contribution (DC) experience required at a master trust, according to 27% of those surveyed. In addition, 73% believe that there is a shortage of necessary DC skills at The Pensions Regulator (TPR).
Carline said: “The governance model in a master trust is different from the governance model within a single trust, whether it’s [defined benefit (DB)] or DC, and trustees are now operating in a more commercial environment, so they are going to have to manage a different set of conflicts than they have in the past. These are some of the areas we will be exploring as we take the [working party] forward.”
The majority (87%) of respondents think that master trusts should focus on member experience and proposition improvements, rather than cost reductions.
Two-fifths (40%) believe that the master trust industry lags behind other sectors, such as financial and retail, when it comes to driving the member experience to be closer to a customer experience. Only 13% of respondents felt that master trusts were moving quickly enough in this area. Most of those surveyed (87%) would support future collaborative efforts to overcome barriers to good service delivery.
Around 87% of respondents think that authorisation will accelerate consolidation and collaboration, as confirmed by the fact that TPR has since announced that 30 providers will not go through the authorisation process. Almost two-thirds (60%) believe that there will be no more than 20 master trusts within five years.