Can you tell us about the consolidation of master trusts and the impact this has had on the Defined Contribution landscape?

The two major master trust themes for the foreseeable future include consolidation and scale. The Pensions Regulator is actively encouraging smaller schemes to review their scale and to keep member outcomes at heart. The regulator is also increasing the standards required to operate a master trust. These factors, combined with auto enrolment, will ensure that master trusts are the fastest-growing segment of the DC marketplace. By some accounts, they will be 78% of all trust-based assets by 2027.

What are the key challenges that master trusts seek to address?

The key challenges master trust seek to address include governance, administration – or what we like to refer to as the member experience – and also the sophistication of the investment range. Smaller and micro schemes face these challenges on a day-to-day basis and they are areas that the regulator is particularly focused on.

How can we expect master trust default investment strategies to evolve?

With greater consolidation and scale we can expect master trusts to consider a wider range of investment options and strategies. They will be considering a wider range of alternatives including private markets and infrastructure. We are also seeing master trusts take into consideration ESG risks throughout their default strategies; and finally, with the rollout of the FCA’s investment pathways, they are going to be developing in-retirement solutions, and also dealing with the ramifications upstream in the accumulation phase, to align with each of these four pathways.

Head of strategic relationships Jin Philips breaks down what the future looks like for master trusts

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