Master trust default schemes continue to enjoy positive returns across the different stages of the glidepath, according to the latest report from Hymans Robertson.
Its third annual master trust default report details the performance of different providers at the growth, consolidation and pre-retirement stages.
The report notes that many providers have not materially changed their investment risk profile from previous years.
Hymans Robertson head of provider relations Michael Ambery says the report shows that although members have continued to enjoy positive returns in each of these phases, there are some early signs of concern emerging.
“For example, some providers are potentially limiting returns by being too over-cautious in the early stages of a DC savings journey when volatility should be accepted. While, on the other hand, some are taking unnecessary levels of risk at the point of pre-retirement, when any unexpected downturns could significantly impact returns.”
He adds: “Alongside all of this, for any investment strategy to work, it is essential that DC members remain informed and up-to-date around their chosen retirement age, what this choice means in practice and, should they wish to, how to change it.
“By ensuring, to as great an extent as possible, that their membership’s retirement ages are accurate then Master Trusts can start to invest more effectively. Ensuring its default approach is not only delivering an adequate income for their members but that it is optimised both to, and through, retirement.”
The report points out that 2019 was a “remarkable year” for the master trust sector, with the authorisation process completing and money continuing to pour into these savings vehicles.
Ambery adds: “ With the completion of Regulator’s provider authorisation process, the introduction of responsible investment requirements and tightening legislation around the Statement of Investment Principle there have been some significant milestones. Accurate performance monitoring and fair comparison has become even more essential and our third annual analysis of default fund performance shows the key trends.”
