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Survey Report

Plan design – and the move towards master trust

Chapter one of the FTSE 350 DC Pension Survey 2020

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By Simon Hankin | July 13, 2020

There has been a slowdown in scheme changes, particularly within the FTSE 100. However, there is still evidence of Plan sponsors looking to consider the vehicle they use for their DC provision and an increased focus on how design elements can support improved member outcomes.

The latest results from our 2020 survey show a continued trend in the use of master trust arrangements. The pace continues to be slow but steady. However, it is remarkable to think that master trusts now represent the chosen method of delivery of nearly one in four companies in the FTSE 350, given it is only a little more than seven years since they entered the mainstream market. Our expectation is that this trajectory will continue as there is also still a good proportion of FTSE 350 companies that have indicated they are likely or extremely likely to change the vehicle they use in the next two years.

Graph showcasing the use of master trusts for FTSE 100 and FTSE 250 companies
Master trusts gain ground

Master trusts useage in FTSE 100 and FTSE 250 companies

DC design and delivery has changed significantly in the last five years and CDC may well mark a further step forward in plan design.”

Simon Hankin
Director, Retirement

Companies that have chosen to continue to operate their own trust-based arrangement have also looked to make delivery as efficient as possible, with the result that nearly nine in ten FTSE 350 DC arrangements are now “bundled”, with investment management and day to day administration undertaken by the same provider regardless of the wrapper under which they are delivered. All of this points to companies looking to modernise the delivery of DC pensions to improve the member experience to and through retirement, taking advantage of options to deliver that experience in a manner and pace that is more efficient and effective than they might be able to achieve alone.

Graph showing the average contribution rates between non-matching and matching FTSE 100 companies
Graph showing the average contribution rates between non-matching and matching FTSE 250 companies
Average contribution rates between non-matching and matching FTSE 100 and FTSE 250 companies

Our experience shows that inertia plays a part in decision making and where companies have used the maximum level within their scheme’s design as a default, the majority of members have not traded down.”

Simon Hankin | Director, Retirement

Within the FTSE 100, contributions have stabilised after something of a jump last year. However, the FTSE 250 group continues to show a fairly material upward trend relative to last year. What’s interesting though is that nearly nine in ten companies use the minimum contribution rate under their own scheme’s design as their default entry level. That’s not to say all companies are using the statutory minimum design required by legislation, but it does provide anecdotal evidence that unless individuals understand the options available and take action, additional opportunities for increased contributions might be being missed out on.

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Simon Hankin
Director, Retirement

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