Would you take your chance on a mastertrust?



With characteristic gusto, my spar (some would say nemesis) John Lawson writes on the Pension Regulator’s Linkedin group

Why is it that people look at master trusts through rose-tinted spectacles? Master trusts are similar to GPPs in that they bring scale to allow costs to be spread across a large number of members. However, their governance is extremely weak for two reasons:

1) Their trustee boards are conflicted having been appointed by either the administrator or investment manager
2) They are virtually unregulated, only being asked to ‘comply or explain’ under tPR’s new regime. Self-regulation by another name years after that failed concept was canned for insurers and regulated advisers.

GPPs on the other hand have close and continuous supervision from FSA and, as a result are better governed.

Maybe the years of propaganda have sunk in? Should be master trusts receiving the red card!

And if I worked for an insurer competing with master trusts I’d be thinking much the same thing.

Yesterday , due to “person under-a-train-at-Leyton” about 2000 of us were booted out of Holborn tube to find busses to the City.

When you get on a bus, you pay £2.40 no matter how far you go (less with an Oyster I know). Busses passed by – there were no passenger spaces for the hundreds of us at the bus-stop…… but there were taxis.

One of our number flagged down a cab and shouted to us “can take four to Liverpool Street“. People ran to join him, this happened again and again as people cottoned on..

I found myself sharing a cab with some interesting folk. We ended up splitting the bill five ways – £1.50 each.

English: Roundel on Holborn tube station Picca...

English: Roundel on Holborn tube station Piccadilly line westbound platform (Photo credit: Wikipedia)

If you get on a bus, you know what you’ll pay and you know what you’ll get. A GPP is a bit like a bus.

If you organise yourself into a taxi like we did, you get a more random experience. There are less in the ways of guarantees but you’re all in it together – a kind of travelling mutual!

So you have a choice – the crazy and unpredictable world of master trust tuk-tuks and the more sedate and prescribed world of the GPP double-decker.

Now you might say that we should have everything as John describes it in which case you should chose the solid GPP. Maybe you want something rather more collective.

Let me give you an example of the master trust in action to help you focus you focus on the decision.

My friend Paul Bannister runs Blue Sky pensions. The amount that people pay to be a member of this pension master trust changes each year depending on the profitability of the business. Being a mutual, Blue Sky, like John Lewis cannot make a profit.

Over the past few years Blue Sky’s management charges have been falling as they increase in size and embrace more efficient technology. They are getting competitive with other master trusts and if they continue the momentum, they will deliver an awful lot for very little.

But there’s an “if” there. If you are an optimist, you might take a decision that Blue Sky’s proposition will deliver more for less. If you are more cautious you may want to contract on fixed terms with John Lawson’s employer –Aviva.

Those of us who go racing (and I am writing on the morning of the Grand National) will know that the same applies to betting. You can chose to take fixed odds from a book-maker or you can gamble on the tote pool which might give you more or less.

So there you have it. It’s called proper choice and I’m all for GPPs and master trusts squaring up to each other and having the argument. Once again I am grateful to my trusted adversary for inspiring me to take my nose out of the Racing Post.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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