A new report has questioned whether defined contribution (DC) master trusts have the capacity and service quality to deal with system shocks, as the government looks for providers to boost their scale.
Consultancy group LCP found a 25% difference in service standards between the best and worst performing master trusts.
When measured for helpline answer times and performance against agreed service standards, LCP reported a significant difference between the best and worst scores.
It claimed that this could raise questions over providers’ ability to cope with “shocks and sudden increases in demand”.
“The quality of service delivery and the extent to which providers are responsive to member engagement varies across the market,” LCP said. “This will become an increasing focus when the government’s new Value for Money framework comes into effect.”
However, LCP’s report acknowledged that master trusts were working hard to improve their services and boost other elements of their offerings such as financial wellbeing and post-retirement options.
The consultancy group highlighted that master trust providers should take into account multiple sources of feedback. Trustpilot scores for the 14 providers in its report averaged around three out of five, and ranged from 1.2 to 4.7.
LCP’s report stated: “Pensions might not be at the top of peoples’ minds for a large part of their life, but, when they need to make changes or access their savings, the service they receive is crucial.
“Most master trust providers have their own processes for getting real feedback from their members, which may be more scientific, but they should not lose sight of simple feedback existing in the public domain.”
On decumulation, LCP said there had been little innovation beyond products based on the Financial Conduct Authority’s Investment Pathways – which map out four investment approaches targeting an annuity, cash, drawdown, or no withdrawal.
Several providers are developing post-retirement options, however, with new models set to emerge this year.
Rachel Crowther, principal at LCP, added: “The master trust market is varied but competitive. There are significant differences between providers so it’s really important to dive into the detail of how they work to ascertain which one will meet your needs and those of your members.”
