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Author: Lifesight

WTW FTSE 350 Defined Contribution (DC) Pension Survey 2021- the master trust view

WTW’s 2021 survey not only reveals evidence of increased demand for master trusts, but also highlights some of the key factors which make the move towards master trusts increasingly inevitable for many.

DC market to double in size within the decade

The size of the UK DC market has been on a one-way path since inception, and all indications are that this is set to continue at pace.  The current overall market size is around £500bn and is expected to exceed £1trn by the end of the decade, by which time master trusts are likely to be the biggest segment of the UK DC market.

Evidence of demand for master trusts: increased consolidation

WTW’s survey reveals that over 60% of trust-based schemes are considering moving to a master trust in the next two years.  This should come as no surprise as the UK government’s policy intention is to encourage consolidation, stating schemes of less than £100m need to “justify their continued existence”.  With the second phase of the consolidation drive now being consulted on, focussing on schemes between £100m and £5bn, it seems like this policy intention may compel even faster consolidation than schemes are already planning.

Employers and members are expecting more

The top objective for two-thirds of employers is to improve member outcomes.  In terms of the focus of activity over the short term, the top three areas of expected activity are:

  • Enhancing tools and educational materials for members (68%);
  • improving at retirement support (59%); and
  • increased focus on ESG investment (54%).  

But costs are expected to fall

Many employers are also expecting that the costs of running a DC pension scheme will reduce overall, with 25% of respondents expecting costs to fall and only 5% expecting costs to increase.  Taken with the point above that employers and members are demanding more, the only realistic way that the market can do more for less is to exploit the economies of scale from large schemes through consolidation. 

Due to their increasing scale, master trusts will have the ability to innovate rapidly and provide enhancements as part of the package.  For example, here at LifeSight we have launched a new app, fully adopted the PLSA retirement living standards and further enhanced the sustainability credentials of our investments all within the space of 12 months1.

About the survey

The WTW survey was carried out at the start of this year whilst the UK was starting to emerge from the effects of the COVID pandemic.  For further information on the survey and to explore other trends revealed relating to the UK DC market, please select access the report.

Access the report

1 https://www.lifesight.com/latest-news/lifesight-embraces-plsa-retirement-living-standards and  https://www.lifesight.com/latest-news/lifesight-commits-to-net-zero-emissions-by-2050-latest-with-a-50-reduction-by-2030