Two-fifths (40%) of large pension schemes worth over £1 billion have been found to now be in master trusts, matching own-trust schemes for the first time, according to new research from Barnett Waddingham (BW).
The fifth annual Analysis of large defined contribution (DC) schemes report analysed 122 of the UK’s largest DC pension schemes, covering a combined £157 billion in assets.
It found that 26% of assets in own-trust schemes are in self-select funds, compared to just 16% in master trusts, suggesting people within these schemes feel more confident or better supported to move out of a default strategy.
The combined total of bundled and unbundled own-trust schemes (39%) still exceeds the number of large schemes within master trust sections (34%).
In addition, average charges for master trust default investment strategies fell to just 0.21%, the lowest of any scheme type and on par with average off-the-shelf default charges.
When looking at engagement, online usage, retirement planning actions and completion of expression of wish forms across a sub-section of 33 large schemes, own-trust schemes were higher than their master trust counterparts. While around 47% of members across all schemes sought out advice for retirement, this rose to 48% in own-trust schemes, compared to 46% in master trusts.
Mark Futcher, head of DC at BW, said: “Master trusts have already helped to deliver real improvements, both in terms of price and operational efficiency, and they will continue to play an important role in the years to come. But as more employers weigh up whether to move into a master trust, it’s crucial they don’t mistake cost-cutting for value. Our research shows that many own-trust pension schemes, particularly those run by larger employers, are also continuing to deliver exceptional value, especially when it comes to member engagement, digital interaction and at-retirement decision making.
“The right solution will look different for every business and in a system moving rapidly toward scale, trustees and employers have a real responsibility to ask: what will drive better outcomes for our people? In this environment, choosing the right structure isn’t just an operational decision, it’s a meaningful commitment to the futures of millions of savers.”
