MasterT rTru rusts ts where to fr to from om he here? Dianne - - PowerPoint PPT Presentation

IAPF Annual DC Conference 2016

MasterT rTru rusts ts – where to fr to from

• m he

here?

Dianne Day Independent Trustee Services Ltd

IAPF Annual DC Conference 2016

AGENDA DA

• UK Master trusts
• Australian Master trusts
• Is consolid

lidation ion good for savers?

IAPF Annual DC Conference 2016

UK K Mas aste ter tru r trusts

• Re-emerged to satisfy auto-enrolment market
• 100+ providers and growing
• Life companies, consultants and IFAs
• Transfers of DC legacy schemes (20k+)
• Employers wishing to outsource due to increasing

governance requirements

• Minimum 3 independent trustees

IAPF Annual DC Conference 2016

New ew Pen ensions sions B Bill ll

• Stronger legislative barriers to entry for master

trusts (lower than contract-based)

• Mandatory Master Trust quality assurance?
• Avoid members bearing costs of

“ “disorderly exit”

• Policy pro-consolid

idatio ion, n, but complex and costly transfer process

IAPF Annual DC Conference 2016

2030 030 – market et c consolid

• lidation

ion t towards s master t r trusts a and c contrac ract p provi viders

2030 2015

Existing DC schemes 3.9 million Master trust schemes 3.9 million Other automatic enrolment DC schemes 2.9 million Master trust schemes 6.6 million Existing DC schemes 2.1 million Other automatic enrolment DC schemes 5.0 million

IAPF Annual DC Conference 2016

Australia lian s super er c consoli nsolidation: ion: number er o

• f schem

emes es

Year

Corporate Industry (not for profit) Retail (incl MTs) Self- managed (<5 MBRS)

1996 4,100 169 372 100,000 2006 555 81 174 326,000 2016 54 43 148 569,000

IAPF Annual DC Conference 2016

Su Super is is a $2 t trilli illion fin financial se services m marke ket

Corporate $54bn Industry $446b Retail $541 bn Self- Managed $597b Public sector $354b

IAPF Annual DC Conference 2016

Differ erent ent or

• rigins:

s: now

• w a

all p ll public offer er

Industry F y Funds

• Not-for-profit, union-based
• Aligned to industries/awards
• Low per-member fees
• Simple products, low choice
• Portable
• Mass-market, lower

balances

Reta tail

• Commercially driven
• T

arget corporate market

• Higher per-member fees
• More choice and extras
• Portability
• Focus on high-balance

customers & advice

IAPF Annual DC Conference 2016

Consol nsolid idation

• n o
• f provid

ider ers s – lower wers c s costs & & im impr proves se s services t to membe bers

• Bulk investment management purchase
• Spread fixed costs of advice, governance,

compliance

• Investment in technology, back and front office
• Extra services:
• Advice
• Insurance

IAPF Annual DC Conference 2016

How t

• w to protec

ect m member ers s again inst e excess p ess provid ider er p power wer?

IAPF Annual DC Conference 2016

Look Looking ing a after er m mem ember ers

• Competit

ition ion – 146 licensees/116 My Super (default) licensees for 30m accounts

• Cho

Choice of Schem heme: master trusts portable

• Robust, uniform

m di discl closu sure regi gime me for al all providers: eg $fees

• Def

efault fund und focus us: net performance and standardised information

IAPF Annual DC Conference 2016

LESSO SONS S

• Lost super $14bn – now with

T ax office

• 2007: cost of multiple

accounts $300m+ pa, leads to consolidation services from providers and regulators

• Low account balance

protection – nil fee threshold

IAPF Annual DC Conference 2016

• Master trusts will grow in AUM and members, but

shrink in numbers

• They are part of a broader trend for consolida

lidatio ion of both providers and member accounts

• Provider

ider consolidation is good for savers in lowering costs, IF IF balanced with a clear competition policy and member safeguards

• Regulatory environment needs to support a low-cost,

efficient consolidation/transfer process

Maste tertru trusts UK & K & Austr tralia