Employer pension changing to master trust.

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colin79ie

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I received a letter from Aviva saying that my employer and trustees have requested to be transferred into a master trust pension from our current defined contribution scheme.
It appears this is due to some changes in EU rules which would mean higher costs for our existing scheme, therefore moving to the master trust to reduce those costs using scale to their advantage.

With limited pension knowledge, is there anything I should be asking about?

Looks like we have no say in it anyhow, and that's fine as it is out employers call, but I'm guessing people will be asking about it, especially as the letter was the first anyone knew of any change.
It does outline that there will be no changes to charges, etc etc and nothing needs to be done..
 
colin79ie said:
It appears this is due to some changes in EU rules which would mean higher costs for our existing scheme, therefore moving to the master trust to reduce those costs using scale to their advantage.
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IORP II perhaps?

Transferring a pension because of IORP II at age 57

A relative has been instructed that they must now transfer their executive pension because of new IORP regulations that apply. One of the options is to transfer to a PRSA. They are now 57 Years old. What are the considerations and risks at this stage by changing ? They had anticipated continuing...
www.askaboutmoney.com
Maybe check out what the Pensions Authority have to say about master trusts for a start?

Search - pensionsauthority

www.pensionsauthority.ie www.pensionsauthority.ie
If that link doesn't work for you then just go to their website and search for "master trust".
 
The main things you need to ask are the 3 things that will affect you.
1. What will the new fees (to you) be and are they lower than the old scheme. E.g. my Mastertrust trust charges 0% allocation fee, 0 monthly fee and 0.55% Annual Fee
2. What funds are available - There should be a range of passively managed equity funds available, like a world index fund,
3. What's the default fund, what are the fees specifically on the default fund, how does the default fund performance compare to the old default fund.

Side note, when comparing pension fund performance you should be looking over 5 and 10 year periods. Ignore anything less than 3 years.
 
AJAM said:
3. What's the default fund, what are the fees specifically on the default fund, how does the default fund performance compare to the old default fund.

Side note, when comparing pension fund performance you should be looking over 5 and 10 year periods. Ignore anything less than 3 years.
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Is there really any point in comparing historical performance? Seems to me that it's only useful to compare charges with a view towards minimising them, and to ensure that the pension is invested in an appropriate asset mix, ideally (in my opinion) with a high or full equity content. And maybe choose an index tracking fund to mitigate performance issues due to active management by people who, ultimately, can't predict the market/future.
 
Well to your point Clubman, it was in comparing historical performance between my old default fund (Empower Growth annualizing ~6.6%) and the index tracker (World index annualizing 12.2%) that originally moved me out of the Default fund and into the index.

It was when I was a lot younger and didn't understand the importance of asset mix (which most people still don't). But even back then I could understand performance.

But again to your point, I put my 3 Q's in order of importance (IMO) so yeah, get those fee details first.
 
colin79ie said:
It does outline that there will be no changes to charges, etc etc and nothing needs to be done..
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No changes to charges?

One advantage of master trusts is the fees are usually lower, unless the fees were already very low this could be one question. Not sure what the average fee is now with mastertrusts - but below 0.5% seems to be typical.
 
The changes that are taking place are at trustee level. The way your pension is invested and your options at retirement won't change.

ashambles said:
No changes to charges?

One advantage of master trusts is the fees are usually lower, unless the fees were already very low this could be one question. Not sure what the average fee is now with mastertrusts - but below 0.5% seems to be typical.
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Under IORPS II, there is a huge amount of additional obligations on schemes that is going to increase the cost. Shifting to a master trust will provide economies of scale. But given the additional reporting and obligations required, I doubt you will see a reduction in charges, especially initially while they are being implemented. There may be a reduction in the future once providers have a better idea of costs when everything is fully implemented.

With IORPS II being enforced on all company schemes from 2026, do not expect fees to come down before then. Every company pension scheme ever written will have to be transferred to a master trust, Buy Out Bond or PRSA before then.

Steven
www.bluewaterfp.ie
 
Steven Barrett said:
But given the additional reporting and obligations required, I doubt you will see a reduction in charges, especially initially while they are being implemented.
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It's not the savings or costs of mastertrusts that have been affecting fees, it's simply that there can be a change in fund provider due to the mastertrust - more competition for existing company schemes and some of the mastertrusts have literally nothing except lower fees to recommend them. (My own fees are substantially down due to a move to mastertrust - so I'm talking from direct, if limited, experience)

Aviva should be pressed on fees as if this is new business, especially if this an older scheme with higher fees. I don't like how they try to claim no changes to fees as a positive.

If they don't get a fee cut at this point, it's unlikely to be offered in 2026 from Aviva when they're at much less risk of losing this company scheme.
 
Hello,

I've a small DB scheme benefit, along with AVCs, from a previous employment.

I've recently been advised that the AVC element is being moved to a MasterTrust (no impact on DB scheme, which is seperate). Awaiting paperwork, but indication is that there will be no changes to fees, they'll still offer a similar range of investment funds etc.

Is there the option to redirect the funds (AVCs) to an alternative, both now and perhaps in the future, or am I simply being told that my funds are going into the new MasterTrust, end of story?

Truth be told, my key concern is that it'll be a very hands off, and extremely passive approach to managing the funds, once they go into the MasterTrust, hence my question about ability to transfer, both now and in the future?

Many thanks,
 
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MrEarl said:
Hello,

I've a small DB scheme benefit, along with AVCs, from a previous employment.

I've recently been advised that the AVC element is being moved to a MasterTrust (no impact on DB scheme, which is seperate). Awaiting paperwork, but indication is that there will be no changes to fees, they'll still offer a similar range of investment funds etc.

Is there the option to redirect the funds (AVCs) to an alternative, both now and perhaps in the future, or am I simply being told that my funds are going into the new MasterTrust, end of story?

Truth be told, my key concern is that it'll be a very hands off, and extremely passive approach to managing the funds, once they go into the MasterTrust, hence my question about ability to transfer, both now and in the future?

Many thanks,
Click to expand...

It's possible to transfer your AVC fund into an AVC PRSA of your own choosing, now or in the future.
 
MrEarl said:
Hello,

I've a small DB scheme benefit, along with AVCs, from a previous employment.

I've recently been advised that the AVC element is being moved to a MasterTrust (no impact on DB scheme, which is seperate). Awaiting paperwork, but indication is that there will be no changes to fees, they'll still offer a similar range of investment funds etc.

Is there the option to redirect the funds (AVCs) to an alternative, both now and perhaps in the future, or am I simply being told that my funds are going into the new MasterTrust, end of story?

Truth be told, my key concern is that it'll be a very hands off, and extremely passive approach to managing the funds, once they go into the MasterTrust, hence my question about ability to transfer, both now and in the future?

Many thanks,
Click to expand...
I haven't understood that part of the Master Trust rationale: by moving from a scheme with trustees aligned to the employment to trustees far removed from the employment is supposed to better look after the members' interests.
 
Fortune said:
I haven't understood that part of the Master Trust rationale: by moving from a scheme with trustees aligned to the employment to trustees far removed from the employment is supposed to better look after the members' interests.
Click to expand...

I see your point but in many cases, small schemes had trustees who were either the employer company or nominated staff members / directors and had little knowledge of pension trusteeship. At least Master Trusts are run by professional trustees.
 
MrEarl said:
Truth be told, my key concern is that it'll be a very hands off, and extremely passive approach to managing the funds, once they go into the MasterTrust, hence my question about ability to transfer, both now and in the future?
Click to expand...
I think moving to a MasterTrust is actually to your benefit. A MasterTrust is just some Backoffice government legal mumbo jumbo that allows (nay encourages), the tens of thousands of different pension schemes in Ireland to consolidate down into a handful of much bigger schemes. They want to do this because it is then much easier to have oversight on a few big Trusts instead of thousands of small schemes. This should benefit you with more professionalism, economies of scale and lower fees.

But note that a MasterTrust does not manage funds. They simply pick the funds that they wish to make available to you. You choose between the funds. But crucially the fund managers are the same people they always were.
 
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