DC pensions: what is a master trust? 

In constitution, a master trust pension is the same as any other trust-based pension scheme. The difference is that it is structured to look after pension savings sponsored by different employers, each with their own section within the master trust.

Trustees are generally independent of the master trust provider. Although governance and regulatory responsibilities sit with the trustees, participating employers retain the ability to make decisions about contributions and investments.

There are 36 authorised master trusts in the UK. All meet TPR’s exacting requirements and are subject to the same rigorous ongoing scrutiny.

However, there are features that differentiate them. The largest DC master trusts in the UK market are provided by bulk market auto-enrolment solution providers, employee benefit consultancies and insurers.

Some master trusts target larger schemes, so smaller employers may be restricted to using the bulk market auto-enrolment solution providers, with less control and fewer options. Those with more members may be able to access wider options through other master trust providers, including shared investment governance, more bespoke member communications and member access to financial education and wellbeing programmes.

In addition, the extent to which master trust pension schemes offer future proofing varies, with most tied to particular administrators and fund managers, while a small number operate a more openly structured model where providers can be changed to keep pace with evolving market needs.

With all DC master trust pension schemes now operating under authorisation and continuing supervision by the Pensions Regulator (TPR), members can take comfort from the fact that their retirement savings are protected and managed to the highest standard.

TPR’s most recent survey of DC schemes found that master trusts performed better on each measure of providing value for members than the wider trust-based environment.¹ This report followed an earlier TPR survey that showed in virtually all areas of scheme management and governance, master trusts demonstrated greater rigour, thoroughness and consistency than the wider market.²

Meanwhile, growing numbers of members don’t have enough saved at the point of retirement and we’re drawing too heavily on what we do have. Widespread failure to access education, guidance and advice is leading to poorly informed decisions, from how much we save and how we invest through to how and when we access our pots.

Many employers sponsoring own-trust, or even contract-based, arrangements are questioning whether their employees, and their own business objectives, are being best served in terms of quality of governance, administration, investment and engagement.

All of this continues to drive the rise of DC master trust pension schemes, whose membership has risen to 20.7 million from 16.6 million in the past two years as assets have more than doubled to £78.8 billion from £38.5 billion.³

_{^{1 TPR. Defined Contribution Trust-Based Pension Schemes Research — Report of Findings from the 2021 Survey, May 2022
2 TPR. Defined Contribution Trust-Based Pension Schemes Research — Report of Findings from the 2018 Survey, May 2019
3 TPR. DC Trust: Scheme Return Data, January 2022 and February 2020}}