The growing number of DC master trusts means that employers need to undertake research to make the right choice for their employees and to avoid ending up in a failing scheme.
The DC master trust market is picking up pace and over recent months we have seen many new providers wanting a piece of the pie. This presents a couple of challenges for employers when they make their selection decision and they should therefore be asking some important questions.
Firstly, they will need to check that the master trust has rigorous operational procedures. They should be asking whether there is a professional independent trustee, does it have sound administration procedures, how are assets protected, how is value for money achieved and how are members helped to make informed contribution, investment and at retirement decisions? They will also need to check that the master trust is sustainable over the long term and should ask how it is financed, whether it has adequate capital to continue to operate and how the financial model has been stress tested?
Having too many master trusts also defeats the very purpose of them, the main being economies of scale. There is also a significant risk that, should these badly constructed trusts fail, employers will face litigation and their employees and former employees will lose potentially thousands from their savings.