Demand for GPP schemes in workplace pensions has “stabilised”, after commission driven sales a decade ago, but these still remain popular options despite the rapid growth of master trusts.
Debating the priorities for DC scheme selection at the Corporate Adviser summit there was a split of opinion about the benefits of GPP schemes.
Many in the audience felt that GPPs still offered additional flexibility for members which made them an attractive options. However panel member Victoria Panoramo, senior DC investment consultant at Hymans Roberston says that for their clients its is the scale offered by Master Trusts that is often the decisive factor.
“Clients want scale and master trust have the ability to hold onto deferred members. Through their governance structure, they also have the option to move arrangements should things go wrong.”
As she pointed out there is already a market from switching form one master trust to another and it is this “safety feature” that can be attractive.
Other thought pointed out that GPPs were still winning new and often substantial schemes. Delegates though said though that there can be a lack of providers in this market, and a lack of investment in GPP propositions which can make it less attractive when reviewing and recommending options. As one delegate said it can look like the “usual suspects”. In comparison, there were more master trust providers, including a number of newer providers with technology-led propositions, such as Cushon.
Mercer Marsh Benefits partner and mid-market leader David Dodd, who was on the Corporate Adviser panel, said then digital capability was increasingly important aspect when selecting a workplace pension scheme.
“This is a big point of differentation” he said. He pointed out that people have increasingly come to rely on a range of digital platforms and products during Covid and lockdown, but this level of digitialisation was not yet standard across much of the employee benefits markets. There was a need for this to change he said.
Other factors such as financial education and wellbeing options can also add real value to a pension proposition for employers he added.
Looking ahead, both Dodd and Panormo said there was the potential for a “capacity crunch” with the increase of scheme transfers, particularly from single-employer trust to master trust structures. Panormo said that Hymans alone had advisers on £7bn of switches into master trusts in the last couple of years.
There was also the widespread expectation that there would be further consolidation in the master trust sector, which could further contribute to this capacity crunch.
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