Last week saw the news that 1 in 3 trust-based defined contribution arrangements expect to transfer members to a Master Trust in the next 5 years. Only 1 in 3 was my initial thought, given the positive experience I’ve had taking a client through this process over the past few months. Whilst change is often scary, takes time and costs a bit of money, there are obvious advantages to making a move from a trust based arrangement to a third party provider.
Here’s my top three reasons.
1. Reduced fees and cost
There are some great rates out there being offered by Master Trusts, driven by economies of scale that smaller schemes just can’t replicate. Reduced fees will save your members money and mean more for them in retirement. What’s not to like?
2. More time
Unless you’re running pension schemes as your main business activity, why would you want to do this at all when a competitive market now exists that will take this off your hands? It’s worth adding up the time taken in your business on trustee meetings, managing production of accounts and completing scheme returns etc. Is this really a good use of your management team’s time?
3. Reduced risk
As an advisor my least favourite phone call is the one from a new client that has been fined by the Regulator and needs me to help them sort it out. Running trust based pension schemes is hard and things do go wrong. If you can outsource governance risk, it makes sense to do so. Master Trusts allow that to happen.
So, if you’re running a trust based defined contribution scheme please stop and ask why you’re doing it. If there is a good reason then absolutely carry on.
If there isn’t then maybe it’s time to think about a change. Give me a call on 07786 992 802 if you want to chat this through. I’d be happy to help.
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