Scottish Widows  

Scottish Widows has its eyes on the master trust prize

Scottish Widows has its eyes on the master trust prize

When Lloyds Banking Group released its strategic update late last month, there was one line buried in the literature that could almost have been missed.

Under the heading “maximising the group’s capabilities” it said the group would be “increasing Financial Planning and Retirement (FP&R) open book assets by more than £50bn by 2020 with more than 1m new pension customers”.

This did not mean, as the bank pointed out, that it would be building a financial planning workforce, only six years after pulling out of mass market advice.

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Instead what it means is that it will continue to invest in its intermediary distribution network and it plans to increase its pension book assets by 30 per cent, to make it the biggest provider of workplace savings in the UK.

What it has identified is that workplace savings are a big growth sector, especially in the defined contribution (DC) arena; the exciting place to be is as a provider of group personal pensions (GPP) or master trust schemes, as employers looking to de-risk their DC trust-based schemes into an outsourced provider, saving on costs and time and governance burdens.

Jackie Leiper, distribution director of Scottish Widows (a subsidiary of Lloyds Banking Group), said: “We’ve seen a high level of growth in workplace pensions. A lot of this comes from existing employers; this isn’t auto-enrolment, this is employers restructuring their arrangements. We are seeing growth in areas where employers are moving out of trust-based arrangements to master trusts or GPP arrangements.

“It’s a fairly bouyant market and we’re seeing a lot of enquiries. It’s coming from employers to improve their proposition.”

Many will be familiar with de-risking of defined benefit (DB) schemes, as employers look to offload their responsibilities to a third party; the new trend is for those with burdensome DC schemes, where the employers have had to bear more responsibility for looking after these schemes following recent government and regulatory attention. Moving over to a GPP or master trust allows for greater control by the employee.

Key points

  • Last month Lloyds announced it wanted to be number one in workplace pensions
  • A big trend the provider is picking up on is the move out of DC arrangements to GPP or master trust
  • Scottish Widows is a big player in GPP and will soon have a master trust

Andrew Pennie, marketing director, financial services, of Intelligent Pensions, said: “The traditional trust-based scheme puts more responsibility on the employer, with trustees and having the infrastructure to support it, but GPP and master trust arrangements allow the employer to offload that. 

“The only downside is that you’re not able to tailor everything to your range of employees, you’re having to fulfil a whole range of demands of people with different needs.

“We think this is an unintended consequence of pension freedoms; there’s so much more risk in pensions, because people can access them early, you’ve got all the options: drawdown, cashing out, annuities. Some companies are saying: ‘It’s too much for us, we’re going to offload that risk and give you another provider.’”

To some this is another form of ‘de-risking’. The more familiar territory is employers with DB schemes de-risking themselves from the pension assets liabilities, whereas now the big growth area is the move out of DC trust-based schemes.