Master trusts a force for the good? Yes, but….
22 Apr 2016 - Estimated reading time: 60 seconds
A well-constructed fund has tremendous potential, genuine independent oversight from a board of trustees filling the void left by an unengaged employer, or as a secondary overlay (sense check if you will) to complement the work of an employer governance committee. Put that way I can’t see many reasons to opt for the alternative – a contract based GPP.
The worry given the current lack of barriers to entry is that almost anyone can set up a master trust. That can’t be a good thing. I’ve always strongly felt that if you keep consumer needs at the centre of what you design and deliver you won’t go far wrong. Can that be said of all the 73 registered funds? There has to be a very large question mark against the motives of some of these providers. I’ll let you draw your own conclusion.
A fear of future disintermediation is driving some organisations to launch master trusts into an environment that is predicated on building scale. As Richard Butcher of PTL has pointed out they can’t all be successful, especially so when a number of providers including NEST have already established commanding positions based on membership scale.
We should brace ourselves for a number of future failures and it’s imperative that the government introduces a high bar in terms of capital adequacy and consumer protection to avoid undermining the pressing need for individuals to save adequately for their old age.
In the meantime when assessing a potential master trust consider carefully the genuine independence of the three parties involved – the administrator, the trustee board and the adviser making the recommendation.