The Pensions Management Institute has said that the growing master trust sector must overcome “significant obstacles” if it wants to deliver a good service for members.
To achieve this end the professional body has established a working party of eight companies to address these issues.
In a report into this sector, the PMI pointed out that master trust authorisation would drive consolidation and collaboration in the industry.
In a survey of 15 major master trust providers all welcomed this authorisation, with almost nine out of 10 (87 per cent) saying this would accelerate consolidation in the sector.
In total 60 per cent of those companies surveyed thought there would be no more than 20 master trusts in five year time.
However, while there was widespread support for both authorisation and consolidation, the report found some respondents were concerned about the level of supervision from The Pensions Regulator, and how prescriptive this may become.
This report showed almost a third (27 per cent) expressed preference for a more principles-based approach, however 73 per cent were content with the TPR’s detailed approach.
When asked about the level of advice and guidance needed, 53 per cent agreed that rules around advice and guidance impede the current and future delivery of services to members. Also, almost half (47 per cent) of respondents claim the regulations impact effective member communications.
The working party also looked at how the introduction of technology could help support the growth of the industry.
More than half (53 per cent) of providers believed that newer industry-wide collaborative technology such as pensions dashboards would help drive the adoption of technology amongst master trusts. However, almost three quarters (73 per cent) of master trust providers claim that current systems limited their ability to adopt new technology.
The research also identified areas for further improvement, notably skills within DC. Almost one third (27 per cent) of those surveyed think that trustees do not possess the right balance of commercial and DC experience required at a master trust.
The problem is thought to be industry-wide as almost three quarters (73 per cent) of respondents believe there is a shortage of DC skills at TPR.
Pensions Management Institute president Lesley Carline says: “Our report has shown that the growing master trust sector must overcome significant obstacles if it wants to offer good service delivery for members.
“However, the figures also indicate that much of the industry, including some major players in the master trust sector, are largely aligned and eager to work together to help tackle industry issues.”
She says that most supported a more collaborative approach, which is one of the reasons the PMI has established this working party. She adds: “We look forward to facilitating this process over the coming year.”
Origo’s managing director Anthony Raffery adds: “The PMI report shows the progressive nature of the master trust market – highlighting that most master trusts will support future collaboration to deliver improved service to members.
“The report also discusses the transformative impact that pensions dashboards will have on master trusts, with more than half of survey respondents believing that this will drive their adoption of technology.
He adds: “I am certain technology can be an enabler for master trusts, helping to reduce processing costs and increase efficiencies. Origo’s experience is that technology, when implemented effectively, can significantly improve outcomes for consumers.
“Such improvements are demonstrated through the options transfers service – used by master trusts – where transfer times for pensions average 11 calendar days. The service also enables master trusts to transfer members in bulk, where such transfers have taken just five calendar days to complete.”
The working party consist representatives from Atlas Master Trust, BlueSky Master Trust, Eversheds Sutherland, NOW:Pensions, Origo, Pinsent Masons, Scottish Widows, SmartPension and the Pensions Management Institute.