Bluesky Pensions will launch a new master trust later this year, with the single purpose of acquiring workplace defined contribution (DC) schemes from companies that no longer want the responsibility of runnning them, FTAdviser can reveal.
Called the Bluesky Umbrella Trust, the new master trust will be entirely separate from the firm’s existing auto-enrolment master trust, and is not designed to comply with auto-enrolment rules, such as the 75 basis point charge cap, Bluesky chief executive Paul Bannister told FTAdviser.
Unlike Bluesky’s not-for-profit AE mastertrust, Mr Bannister said the Umbrella Trust would be a for-profit venture.
The trust will offer target date funds and the option of 11 self-selected funds managed by AllianceBernstein; plus a lifestyle option using LGIM funds.
Mr Bannister declined to reveal the trust’s administration fees, saying they would be different for each employer. Investment fees would be between 10 and 25 basis points.
He said Bluesky was regularly contacted by workplace DC schemes looking for a provider to take over the administration.
“The reality is there are thousands of schemes out there. But the problem we have is they want something different to the standard auto-enrolment scheme,” he said.
In particular, he said they tend to want to negotiate their own fee structure and, more importantly, they want to keep their own brand.
Mr Bannister cited this as one of the reasons for setting up a new master trust, rather than putting DC schemes into the existing AE-compliant scheme. Another reason, he said, was to keep the AE scheme simple.
The umbrella trust will allow companies to white-label the scheme, putting their brand on letterheads and the website. But the scheme itself will be run by Bluesky under a single, multi-employer master trust, Mr Bannister said.
He said it would be ready to launch in October, and already had three potential acquisitions lined up.
Bluesky’s existing AE master trust has 30,000 members, with assets under management of £320m, making it significantly smaller than larger rivals such as Nest and Now: Pensions..
Mr Bannister said there was no set target for the size of the new scheme. However, he added: “We’re a small firm, so we have to manage our growth.”
However, he said the market for non-AE DC scheme consolidiation was huge, and predicted more players would follow Bluesky’s lead. “We’re at the tip of the iceberg. We’re trying to pre-empt what will happen,” Mr Bannister said.
The Pensions Regulator regulates 41,865 pension schemes, the vast majority - 35,710 - of which are DC schemes, and most of those are small workplace schemes. There are fewer than 100 auto-enrolment master trusts, meanwhile.
Nigel Sycamore, director of Clear Workplace, said Bluesky’s decision was a “shrewd move”, adding that other “nimble” providers were likely to follow Bluesky’s lead.
He said demand for this sort of service had significantly increased since The Pensions Regulator’s new regulatory guidelines, released in July, put new demands on trustees of DC schemes.
“Running a DC scheme suddenly looks more onerous, so there will be employers who are more than happy to hand over responsibility to a master trust,” he said.
He said most small company DC schemes are group personal pension contracts with life companies - under which employers must act as trustee. Master trusts do not require employers to act as trustees.
But he said while offloading the scheme to a master trust would be in the best interest of the employer, “whether it’s best for the members is an entirely different matter”.
In particular, he said life companies’ investment options are often superior to those of master trusts.
james.fernyhough@ft.com
