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01 Jul 2013

Large Pension Schemes To Become More Prominent As Auto-Enrolment Progresses

The formation of huge pension schemes that consist of a large number of smaller pension schemes under one common management (also known as ‘master trusts´) will have a dramatic effect on the fragmented British pensions industry, according to Darran Burton, head of defined-contribution pensions at the Pensions Regulator.

Talking at the National Association of Pension Funds conference in London last week, Burton claimed that there are around 50 of these super schemes, run by various organisations, and they are the ones likely to see a big difference.

Master trusts´ membership is predicted to triple by 2017/2018 when the automatic enrolment scheme comes into effect for all British companies. At present, such master trusts, including the government´s public trust Nest, have less than two million members but after the completion of the auto-enrolment, about six million members are expected to have joined.

Meanwhile, Burton stated that the importance of small, ‘micro trusts´ will diminish. There are about 36,000 schemes with fewer than 12 members in the UK, which, he claims, cannot be effective vehicles for auto-enrolment, and 3,000 small and medium-sized employer schemes, which would find it hard to comply with government requirements, he added.

At the other end of the scale, schemes that would be the “big winners” of the pension reforms will be large employer schemes, master trusts and group personal pension, Burton concluded.

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