News / 11.04.19

Will an informal accreditation regime make DB master trusts more accessible?

Recently there’s been a great deal of focus on the so called commercial consolidators, the “superfunds”. These are the ‘new kids on the block’ and have been generating a lot of press attention, with the wider spectrum of DB consolidation solutions somewhat neglected by the media.  This includes the likes of DB master trusts, despite these having long established track records in some cases.  We think other options like these deserve more limelight.

In our recent webinar we were pleased to be joined by Julian Mitchell, DB Policy Adviser at the Department for Work & Pensions, together with Scheme Actuary, Graham Jones, from Hymans Robertson. 

We identified during the webinar that the key drivers for consolidation are:

  • Managing risks more effectively
  • Improving security of members’ benefits
  • Reducing running costs of schemes

We then compared these across the different consolidation options and found that master trusts compare favourably in addressing these drivers, as well as other challenges commonly faced by employers and their schemes.

The government is looking to instil confidence in DB consolidation and benefits available, which we’re pleased to hear. During our webinar the DWP presented, for the first time, what its framework for an informal accreditation regime for DB master trusts could look like:

  • Listing costs on a per member basis
  • Transparency on how trustees are appointed and replaced
  • Providing data on historic investment performance
  • Clarifying the scale of funds under management

We believe it would help even more to build confidence in master trusts if there were transparency requirements in areas like:

  • Schemes being properly sectionalised – avoiding cross subsidy of risk
  • Detailing the level of involvement of the sponsor
  • Demonstration of broader value for money – with publicly available accounts

We hope that an informal accreditation regime will make master trusts more accessible to schemes and trustees, allowing them to conduct more accurate comparisons between master trusts, and with their own standalone schemes.

The aim of consolidation is to create better futures for DB schemes and their members, and we believe master trusts and other consolidation vehicles can support this. Additional government support should help promote benefits of DB consolidation and remove some of the obstacles.

We’d like to hear your views and whether you think the proposed accreditation regime is missing any key requirements. We’d encourage your feedback, so please contact us and share your views.