Can all Master Trusts deliver good outcomes?

Welcome to the first edition of the Master Trusts Unpacked report

Master Trusts have taken different approaches to designing their default strategies which means that each has different characteristics. The key difference amongst providers is in their asset allocation, notably their allocation to risk assets during the growth phase. Variation in the length of the de-risking period employed, including de-risking post-retirement, is also evident across the market.

At present, there is little evidence of master trusts incorporating alternative asset classes (e.g. illiquids) into their default strategies, even though this is a big topic for DWP, genuine illiquid asset exposure is limited to a small number of providers. In contrast it is clear the providers are ramping up ESG integration in their defaults.

Ultimately, the design decisions Master Trusts take about their default strategies determine the extent to which they are likely to provide good outcomes for members.

In this paper, we explore some of the key differences between providers’ approaches to default design and what that implies for:

  • Growth: Have providers’ strategies raced ahead or trundled along in recent years?
  • Consolidation: How smooth is transition from the growth phase to retirement and why does this matter?
  • Shocks: Can default design influence the extent to which members will be affected by market shocks?

The data in the report is based on LCP’s proprietary DC research programme, which assesses commercial providers’ pension solutions.

The Master trust report, authored by LCP expert Nigel Dunn can be explored here:

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