Mastering the master trust

Uni­ver­sal pro­vi­sion of work­place pen­sions is one of the main focus­es of gov­ern­ment pen­sion pol­i­cy.  With auto-enrol­ment, it has been able to con­cen­trate the minds of more and more employ­ers on pen­sions. Employ­ers need to make sure they pro­vide pen­sions for their staff which are appro­pri­ate for their cur­rent as well as future needs and are also trans­par­ent and well-fund­ed.

That every­one has ade­quate sav­ings for their pen­sion is essen­tial. But does that mean that employ­ers have to under­take all the pen­sion plan man­age­ment respon­si­bil­i­ties them­selves, con­sid­er­ing it is not their core com­pe­ten­cy? For more and more employ­ers and pen­sions experts the answer is “no”.

This is why a grow­ing num­ber of medi­um to large com­pa­nies are look­ing to mas­ter trusts to pro­vide cost-effec­tive, well-gov­erned pen­sion plans. A mas­ter trust is a pooled pen­sion scheme where­by mul­ti­ple employ­ers belong to a pen­sion arrange­ment man­aged by a sin­gle trustee under a sin­gle trust, with each employer’s mem­ber­ship ring-fenced from all oth­er par­tic­i­pat­ing employ­ers.

Britain has a large num­ber of small pen­sion schemes. Accord­ing to fig­ures from the Nation­al Asso­ci­a­tion of Pen­sion Funds (NAPF), in this coun­try the aver­age scheme has 2,600 mem­bers com­pared with 10,500 in the Nether­lands and 27,000 in Aus­tralia.

As NAPF chief exec­u­tive Joanne Segars has point­ed out, this makes UK defined con­tri­bu­tion (DC) pen­sion plans more cost­ly to run as well as being less able to opti­mise invest­ments. In fact, schemes with a mem­ber­ship of more than 50,000 have costs of around £15 to £20 per mem­ber while, for those with few­er than 1,000 mem­bers, the costs are around ten times more, accord­ing to the May 2009 Capi­ta Hartshead Pen­sion Scheme Admin­is­tra­tion Sur­vey.

BlackRock’s Mas­ter Trust bun­dles togeth­er scheme admin­is­tra­tion, an invest­ment plat­form, mem­ber engage­ment tools and trustee ser­vices

How­ev­er, the advan­tages offered by the Black­Rock Mas­ter Trust are not only attrac­tive to  medi­um-size employ­ers, they are also prov­ing huge­ly attrac­tive to larg­er employ­ers as they pro­vide access to:

• Pro­fes­sion­al­ly qual­i­fied trustees
• Effec­tive DC gov­er­nance frame­work, whol­ly sep­a­rate from Black­Rock
• Off-the-shelf default and self-select invest­ment options, with the option to tai­lor fund options from the full Black­Rock DC range
• High-qual­i­ty, engag­ing and mul­ti­chan­nel  mem­ber com­mu­ni­ca­tions
•  DC mem­ber ser­vice cen­tre pro­vid­ing tele­phone and online sup­port to mem­bers, and deliv­er­ing enhanced ser­vices com­pa­ra­ble with the best offered to end-con­sumers in any indus­try.

As a leader in invest­ment man­age­ment, risk man­age­ment and advi­so­ry ser­vices for insti­tu­tion­al and retail clients world­wide, BlackRock’s cre­den­tials for run­ning a mas­ter trust are impec­ca­ble and, since launch last year, the Black­Rock Mas­ter Trust has gen­er­at­ed great inter­est among com­pa­nies from all sec­tors.

With our well-regard­ed, trust-based DC capa­bil­i­ty, BlackRock’s Mas­ter Trust bun­dles togeth­er scheme admin­is­tra­tion, an invest­ment plat­form, mem­ber engage­ment tools and trustee ser­vices.

Our con­sid­er­able invest­ment expe­ri­ence – with more than £2.5 tril­lion of assets under man­age­ment – means that we can pro­vide clients access to a greater range of DC plan man­age­ment capa­bil­i­ties than most oth­er pen­sion solu­tion providers.

Despite BlackRock’s size, we are deter­mined to offer the flex­i­bil­i­ty that employ­ers need. Using the Black­Rock Mas­ter Trust, employ­ers are able to offer a pre-select­ed range of funds, includ­ing a choice of defaults, or they can work with their invest­ment con­sul­tant to cus­tomise the default and the invest­ment range.

Today, more than ever, good DC gov­er­nance is at the top of the agen­da for employ­ers and pen­sion con­sul­tants, and so Black­Rock has been care­ful to ensure our Mas­ter Trust is prop­er­ly gov­erned.

How­ev­er, just as it dri­ves down costs, it enables employ­ers to pro­vide DC ben­e­fits under the more strin­gent gov­er­nance mod­el of a trust with­out the asso­ci­at­ed long-term over­heads of hav­ing to appoint trustees or meet the reg­u­la­to­ry and audit costs usu­al­ly asso­ci­at­ed with oper­at­ing trust-based schemes.

Gov­er­nance is under­tak­en by an inde­pen­dent cor­po­rate trustee, whol­ly sep­a­rate from Black­Rock. Fol­low­ing an exten­sive selec­tion process, Inde­pen­dent Trustee Ser­vices (ITS) has been appoint­ed as the cor­po­rate trustee to the Black­Rock Mas­ter Trust. With more than 20 years in the busi­ness, ITS is one of the longest-estab­lished firms of inde­pen­dent trustees.

Pen­sions are essen­tial, but they’re not always upper­most in the minds of many employ­ees and, with con­stant changes in the reg­u­la­tions, they can also be con­fus­ing. Pay­ing for this week’s gro­ceries, a hol­i­day or sav­ing for a rainy day are seen as a high­er pri­or­i­ty for most peo­ple.

Because of this, we have put effec­tive com­mu­ni­ca­tions to mem­bers at the heart of our Mas­ter Trust, and ensured that infor­ma­tion for employ­ers and employ­ees is in plain Eng­lish and eas­i­ly avail­able through a mul­ti­chan­nel plat­form.

As the recent Black­Rock Investor Hori­zons Sur­vey find­ings show, 29 per cent would save more for retire­ment if they knew how much to save now and Black­Rock­’s Tar­get Plan can assist them. Avail­able as part of the Black­Rock Mas­ter Trust, Tar­get Plan is an easy-to-use, ful­ly inte­grat­ed online pen­sion plan­ning tool designed to help employ­ees assess their sav­ing require­ments, man­age changes to retire­ment age, con­tri­bu­tion lev­el and choice of invest­ment.

From talk­ing to employ­ers, we also know that they want to have easy access to the back-office sys­tems which run their pen­sions. The Black­Rock Mas­ter Trust allows employ­ers to admin­is­ter eas­i­ly their scheme online, and can also access and seg­ment their work­force for auto-enrol­ment.

Auto-enrol­ment is chang­ing the pen­sions land­scape con­sid­er­ably. Even with this change in the law, encour­ag­ing employ­ees to invest for their retire­ment in the cur­rent eco­nom­ic cli­mate can be par­tic­u­lar­ly chal­leng­ing.

But as a grow­ing num­ber of employ­ers are real­is­ing, the Black­Rock Mas­ter Trust can pro­vide much-need­ed help to make it pos­si­ble for them to pro­vide the tools and infor­ma­tion required that could help employ­ees achieve the retire­ment out­comes they require.

FUTURE SHOCK

32% of peo­ple in the UK aren’t plan­ning or sav­ing for retire­ment

25% expect to spend 20 years or more in retire­ment

£27k expect­ed aver­age annu­al income, com­pared to £13k cur­rent actu­al year­ly income

44% are not con­fi­dent of achiev­ing their desired lev­el of retire­ment income

Source: Black­Rock Investor Hori­zons Sur­vey, Novem­ber 2012, EMEA

For fur­ther infor­ma­tion on the Black­Rock Mas­ter Trust or any oth­er DC pen­sion queries, please con­tact Paul Buck­sey

paul.bucksey@blackrock.com

+44 (0)20 7743 4680

Universal provision of workplace pensions is one of the main focuses of government pension policy.  With auto-enrolment, it has been able to concentrate the minds of more and more employers on pensions. Employers need to make sure they provide pensions for their staff which are appropriate for their current as well as future needs and are also transparent and well-funded.

FUTURE SHOCK