The master trust sector is predicted to grow to £200bn by 2025, by when at least six schemes expected to have assets in excess of £10bn, according to the third edition of Corporate Adviser’s Master Trust and GPP Defaults Report.
The report highlights the different strategies, asset allocation approaches, risk models and performance outcomes of 30 master trust and GPP default funds together investing over £89bn for more than 12 million UK savers. It also covers the different asset managers used and their approach to ESG, as well as investment advisers, technology, communications and at-retirement functionality. To request your digital copy of the report, click here.
The research shows that scale in the UK DC sector is being achieved very quickly, with at least three mega master trusts expected to have more than £20bn of assets by 2025. The master trust sector is predicted to grow to around £340bn by 2030.
The report also highlights the sharp increase in dormant pots, with the ratio of active to deferred members changing from 11:5 to 12:10 in just nine months. Big providers now have more deferred members than active ones.
Data from the 30 providers contributing to the report shows auto-enrolment default funds enjoyed extremely strong performance in the period running up to the end of 2019, the period covered by the data in this report. Early data gathered since then shows the coronavirus crash has wiped out much of the strong gains of the last five years. Higher risk providers have suffered bigger losses than low-risk ones, but older savers have largely been insured against the downturn thanks to derisking strategies.
Growth phase investors enjoyed an average return in 2019 of 18.9 per cent. 3-year annualised returns were 8 per cent, 5-year were 9.2 per cent. But the gap between top and bottom providers is wide.
Investors 5-years pre-retirement enjoyed 13.9 per cent returns in 2019, with 3-year returns of 6.2 per cent and 5-year of 7.6 per cent. Investors 1 day to SPA saw returns of 8.5, 4 and 4.7 per cent respectively for 1,3 and 5 years to 31.12.19.
Corporate Adviser is the only source of data on performance of master trust and GPP pension default funds that is compiled from data received directly from providers. The data in the report is not generated from calculations or projections made from third-party sources. It comprises the most comprehensive set of publicly-available data on the performance of DC default funds in the UK. Quarterly data on providers, presented in interactive charts, can be accessed at www.capa-data.com.