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

MasterT rTru rusts ts – where to fr to from om 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 olidation ion t towards s master t r trusts a and c contrac ract p provi viders Existing Master trust Existing DC Master schemes schemes DC trust 6.6 million schemes 2.1 million schemes 3.9 million 3.9 million 2015 2030 Other automatic Other automatic enrolment DC enrolment DC schemes schemes 5.0 million 2.9 million IAPF Annual DC Conference 2016

Australia lian s super er c consoli nsolidation: ion: number er o of schem emes es Corporate Industry Retail (incl Self- Year (not for MTs) managed profit) (<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

Super is Su is a $2 t trilli illion fin financial se services m marke ket Public Corporate sector $54bn $354b Industry $446b Self- Managed Retail $597b $541 bn IAPF Annual DC Conference 2016

Differ erent ent or origins: s: now ow a all p ll public offer er Industry F y Funds Reta tail • Commercially driven Not-for-profit, union-based • Aligned to industries/awards • T arget corporate market • Low per-member fees • Higher per-member fees • Simple products, low choice • More choice and extras • Portable • • Portability Mass-market, lower • • Focus on high-balance balances customers & advice IAPF Annual DC Conference 2016

Consol nsolid idation on o of 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 ow 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 Choice of Schem Cho 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

Maste tertru trusts UK & K & Austr tralia 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 IAPF Annual DC Conference 2016