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Master trusts cut prices to attract new business

Master trusts cut prices to attract new business

Master trusts are cutting their prices to build up new business after gaining authorisation from the regulator, a consultancy has flagged.

Hymans Robertson said analysis conducted on the pricing of its clients suggested cuts of up to 20 per cent but it could not give any further details as this was "commercially sensitive".

But it said whereas a few months ago it saw pricing of 0.26 per cent at particular schemes it now saw tenders of about 0.22 per cent.  

"This is the sort of discounting we are seeing across the board," a spokesperson for the firm said.

Hymans Robertson urged companies considering a move to master trusts to act now to take advantage of the new pricing.

Earlier this month, The Pensions Regulator finalised the authorisation process, with a final tally of 37 master trusts having been approved.

Michael Ambery, head of DC provider relations at Hymans Robertson, said: “With TPR’s stamp of approval, we’ve seen that providers are significantly lowering their prices as they work to reach the business targets they have set themselves.

“Any DC scheme which has previously recognised the merits of a move to a master trust should seriously consider whether now is the right time for a move.”

Mr Ambery noted the benefits of moving to these schemes were genuine.

“Savings in terms of governance efficiencies and member administration bring real efficiencies to a company’s pension function, without sacrificing member security,” he said.

However, “while gaining these advantages, corporate sponsors need to ensure this competitive pricing also delivers the value and service they require for employees,” he added.

“They must also recognise the quality offered by a master trust provider in comparison to the value and quality of any current arrangement and make the right decision for their own scheme.”

Adrian Boulding, director of policy at Now: Pensions, noted "a key criterion for authorisation was to demonstrate to TPR that the master trust has a clear vision for the future, including reaching the scale necessary to achieve economies and deliver real value to its members".

He added: "Each of the 37 master trusts now authorised will have shared their business plan with TPR and are under an ongoing obligation to report progress to TPR against the business plan’s targets.

"Many master trusts have enjoyed high rates of growth in recent years as employers have come through the staging process and begun their automatic enrolment duties. But with the staging complete, that avenue for growth is now finished.

"What we will now see is master trusts honing their customer proposition so that they offer an attractive alternative to employers that historically have run their own pension scheme."

A master trust is a multi-employer occupational scheme where each employer has its own division within the master arrangement. They have become a popular solution for employers seeking to fulfil their auto-enrolment obligations in recent years.