News / 11.02.20

5 reasons your pension scheme would be better off in a DB master trust - costs

Increasing running costs and stricter expectations from the Pensions Regulator are just some of the challenges facing employers and trustees of DB pension schemes. Many schemes, particularly those on the smaller end of the scale, would be better off in a DB master trust to overcome these challenges. From accessing better investment returns, to cost sharing benefits and economies of scale, we explore the 5 key reasons why you should consider transferring your scheme into a master trust like Citrus.

Reason #4 – Save on your annual running costs

The costs of running DB pension schemes have soared in recent years. According to Hymans Robertson research the c.5,500 DB schemes in the UK spend around £6.5bn-£8.5bn in running costs every year.  And despite UK companies committing £billions in deficit contributions, many have seen deficits rise.

Employers with smaller schemes face additional pressures, with an increasing governance burden and tighter regulatory scrutiny diverting attention away from running their businesses.

Sharing the costs

Through accessing the benefits of scale and sharing costs with other employers, joining a DB master trust can significantly reduce the burden of running a DB pension scheme, particularly for employers of smaller schemes.

Cost savings can be realised in two key areas:

  1. Administration costs are shared among the employers in the scheme, reducing the individual cost to each employer. This includes charges associated with producing annual reports and accounts, actuarial valuations, auditor fees and Trustee meetings.  
  2. Through economies of scale investment charges are also reduced, with an estimated c.0.25% reduction in investment manager fees per year.

How much could you save?

Calculations from our advisers Hymans Robertson have shown that running costs can be reduced by over 30% by moving to Citrus. This could make a significant difference to your bottom line. 

Cost savings are greatest particularly for schemes paying above average investment, advisory and administration fees. You can benchmark the running costs of your own DB pension scheme through TPR’s comparison tool: https://www.thepensionsregulator.gov.uk/en/trustees/managing-db-benefits/db-scheme-costs-comparison-tool.

Find out how much your specific scheme could save by using our quick Citrus costs and outcomes calculator. 

Reducing your annual scheme running costs is just one of the reasons your scheme may be better off in a DB master trust. Watch out for the next blog in our 5-part series where we look at how you can benefit from a professionally run scheme.

If you would like to find out more information in the meantime, please contact Lindsay Davies.