This work by Go Pensions is most important to any employer considering their DC pension now CDC is a workplace pension alternative.
We should be very grateful to Go Pensions for putting this information out on social media
It provides us with an idea of which pensions are going to make it past the “scale” barriers in place at 2030 – £10bn and £25bn in in Funds under Management. This is not the same as the money in the master trust as most of the commercial master trusts have other Funds that can be counted.
But there is little correlation between size and performance. While the conventional view is that value increases for our money from scale, the reality since these master trusts opened their doors (some as much as 15 years ago) is different.
We learn from the report which providers have scale though average pot size and which through numbers of pots. Again there is no correlation. The small pot players include the master trusts with the most members (Nest and People’s) but also less successful (Now , Cushon and to an extent Smart).
Legal & General do not have especially large pots but have numbers too which make them massively succesful.
But the smart players who have underwritten what they take on to attract profitable business are mainly large consultants (Aon , WTW and Mercer) and the insurers. L&G stand head and shoulders versus their insurance rivals but Aviva , Standard Life and Fidelity are gathering assets within their Master Trusts without recourse to counting their other workplace pensions (typically GPP money).
Where the problems of Scale are most obvious with investment propositions that may have achieved what they promised (out-performance) but without the take-up from employers. It is a sad truth (As Pension PlayPen found out) that most employers stuck with names they knew when it came to choosing workplace pensions).
The survey is once again brilliant. It tells us about master trusts and does not stray into other workplace pensions. Royal London has reported that it is a GPP provider whose GPPs take it out of Scale problems, not so Hargreaves’ Vantage workplace pensions, nor True Potential’s , Penfold’s or Collegia’s.
Whatever they have achieved by way of satisfaction (the Go Ahead report includes Trip Adviser reports and ratings) or performance, they will not get past the Scale barriers unless Government creates further exemptions.
Perhaps the saddest story of them all is with three Master Trusts that are most risk because least sheltered by parents. I am thinking of SEI, TPT and Lewis Investments. All have had consistent top performance since inception and have a high reputation for service. As it stands they will need to sell up in four years time. The eagerness to consolidate from the larger schemes is less pressing as they exceed the Scale numbers leaving these schemes with limited options.
I would like to think that they will consider Collective Pensions (CDC) as one of them. CDC is not valued by pots or by assets under management but by its capacity to meet its promises to pay pensions. I suspect that TPT will offer CDC as an exit for employers in its Master Trust, perhaps such alliances with CDC proprietors will become an option for those Master Trusts with a brilliant past but a bleak future.
