Master Trusts emerging as the DC vehicle of choice for FTSE 350

LONDON5th April 2017 – The use of master trusts by defined contribution (DC) schemes in the FTSE 350 has almost doubled since 2015, reveals research by LifeSight, Willis Towers Watson’s UK DC Master Trust.

The research, conducted as part of the 2017 FTSE 350 DC Pension Scheme Survey, found that nearly one in six (15%) FTSE 350 companies are now using master trusts as their primary DC pension vehicle, up from 8% in 2015. This growth trend is also evident amongst FTSE 100 firms, where master trust usage increased by five percentage points to 13% since 2015.

This rise in the use of master trusts comes at a time when the number of hard defined benefit (DB) closures continues to increase, up 8% since 2015, and DC has become firmly enshrined as the norm for employees. With nearly all (98%) FTSE 350 companies now offering a DC pension to new hires.

The number of schemes using master trusts is set to rise even further with Willis Towers Watsons’ Future of DC survey revealing that, over the next decade, fiduciaries expect a shift away from trust-based plans. This growth trend is expected to continue as an increasing number of organisations review their DB and DC arrangements.

Jo Kite, Managing Director of LifeSight UK, commented: “With the use of master trusts doubling since 2015, we are now clearly seeing that master trusts are being recognised by employers and existing trustees. Whilst contract based arrangements usage has marginally shrunk, master trust usage has doubled, showing a clear direction of travel. As many companies are still only part way through this process, we expect the trend to continue.”

“At LifeSight, we believe one factor driving the adoption of master trusts and trust-based schemes in general, is the flexibility and ease with which they offer members a diverse range of retirement options. This includes drawdown which is becoming a more frequent choice for members. Given that the freedoms were only introduced two years ago, the rate of adoption is quick, suggesting that trustees clearly have a fiduciary duty to look into solutions for their specific schemes. Crucially, emphasis should be on the strength and quality of governance and management of any master trust under consideration.”

About the Research

The 2017 FTSE 350 DC Pension Scheme Survey was conducted between September and October 2015. The study collected information from 259 companies that are were either listed in the FTSE 350, or private companies of equivalent size, on the make-up of their primary DC scheme.

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