The significant growth of Master Trust in Ireland has seen, as of November 2024, Irish Master Trusts hold €32 billion (opens a new window) in assets under management — a significant portion of the Irish defined contribution pension market.
Currently, Irish employers can be broadly segregated into two categories: those who have already transitioned to a Master Trust, and those reviewing and considering a potential move to Master Trust.
For employers who have already transitioned, the current period provides an excellent opportunity to review their current programme and analyse how it is performing, and if there is scope for improvements. For organisations looking to make the move, there are opportunities to benefit from learnings gained from the first phase of transitions.
This article explores the key considerations for employers who have already signed up to a Master Trust and want to explore their options, and employers looking to make that move as phase two begins.
Considerations for business who have already moved
Renegotiating terms
There may be a significant number of employers who moved during phase one that did not negotiate on advantageous terms and conditions — possibly only transitioning for the simplicity a move offered. However, now, there is ample opportunity for employers in this scenario to revisit their original choices. For example, there could be a lot of high charges in schemes that could be reduced — enabling employers to access better terms. Employers should recognise there is growing leverage for negotiating fees.
Poor Master Trust communication
Various Master Trusts have failed to deliver on the communication promises they had originally pledged. For some Master Trusts, communication planning hasn’t come to fruition as quickly as promised. Some Master Trusts have struggled to find and allocate capacity for what they had looked to deliver as other priorities have taken precedent. Poor communication has been characterised by slowness to release information, inadequate digital capabilities to distribute information, and apps and portals that are sub-standard.
Keeping on top of administration
For most Master Trusts, administration continues to be an issue, with some dealing with the volume of transitions better than others. Various Master Trust providers suffered weakened service levels during the peak of phase one transitions — misunderstanding and underestimating the work required for transfers.
Considerations for business looking to transition
Master Trust market consolidation
As the Master Trust sector evolves and matures, there is growing potential for the number of Master Trusts to be reduced in the future. As phase two of transitions begins, this issue should factor into employers scanning the Master Trust market. When assessing the market, employers should conduct proper due-diligence, research, and, perhaps, a thorough RFP to ensure the Master Trust they select is both fit for purpose and future-proofed.Growing momentum
Momentum is continuing within Master Trust adoption — especially within employers who haven’t transitioned yet. These organisations may have not originally wanted to rush their decision and instead wait and watch how Master Trust uptake developed. However, the introduction of the Digital Operational Resilience Act (DORA), and the next phase of IORP II requirements has continued the trend of more compliance, legislation, and oversight being introduced to the pension space. Such regulatory development has made Master Trusts an option that eases compliance for employers. Some organisations had originally perceived that Master Trusts would be restrictive, but these fears are beginning to be alleviated.Auto-enrolment timing
If employers are considering a move to a Master Trust, they must also be cognizant of plans being potentially complicated by first contributions under an auto-enrolment system coming into effect from 1 January 2026 (opens a new window). Timing factors must be considered from not just provider capacity, but also internal capacity. Employers must ensure their pension schemes are fit for purpose and be mindful of conducting any Master Trust transitions around that time, as auto-enrolment will take precedent and be the focus of internal HR teams as it is a regulatory requirement. It could be challenging to balance the workloads of internal teams if transitions are planned around efforts to commence auto-enrolment, particularly for larger employers, as moving to a Master Trust can be a significantly lengthier process.
Considerations for all businesses
Performance data
It is both prudent and critical that employers who have already moved to a Master Trust take time to step back from their original decision and review the performance of their selected Master Trust so far. There have been differentials between all current Master Trusts, particularly in investment performance. Some employers may have selected a Master Trust at a disadvantage of having no past performance to review — possibly choosing a Master Trust that may have just been established. However, over the past two years the differing performances of Master Trusts can now be reviewed, making it easier to shape decisions for the future. Companies looking to make the transition can do so now armed with data on performance history.Understanding and considering group risk
When transitions were being conducted, group risk was bundled in with the Master Trust — giving employers less flexibility to change providers or rebroke where benefits are paid to on death. However, more employers are now placing risk benefits into a single group risk scheme, outside of the Master Trust. It is crucial that employers remain vigilant of where benefits are sitting.Conflicts of interest
Employers should be aware of issues stemming from the governance and independence of Master Trust trustees and any possible conflicts of interest. Master Trust trustees may be employed by or have other links to the Founder of the Master Trust or other relevant organisations — potentially concentrating risk within one company. However, there is a high level of oversight from the Pensions Authority regarding governance and independence. Master Trusts must have the correct policies in place to display their governance structure and policies — and these are subject to regular reviews.
ESG factors
The increasing focus on ESG factors of Master Trusts will continue to grow and alignment with sustainability regulations is a critical aspect of Master Trust management. Master Trusts failing to satisfy or adhere to criteria stipulated by ESG regulations could invoke serious regulatory repercussions.In scheme drawdown
Looking forward, employers must understand how their employees can draw down their pension benefits directly from the Master Trust they select. Currently, employees looking to draw down must transfer to another product on retirement. However, this is something that is likely to change in the future. Employers should seek consultation with HR and pensions experts on accessing some of the key learnings and other important takeaways from the first phase of Master Trust transitions.
Whether your organisation has already transitioned or is looking to make the move to a Master Trust, it is critical you assess all options to find what is suitable for your business. Lockton provides comprehensive analysis of the multiple Master Trusts available to help empower you to choose what is right for your company.
To find out more on how we can support your business select or manage a Master Trust programme, visit our People Solutions page (opens a new window) or contact your Lockton consultant.
