Multiemployer plans will boost the retirement outcomes of future workers better than plan sponsors currently can on their own, U.K. experts agreed, adding that efforts to extend auto-enrollment programs to more groups will reinforce master trusts as the plans of the future.
More plan sponsors will succumb to the power of consolidated DC plans in a master trust because these entities enable access to more investment choices at lower fees as well as to trustees with more experience managing DC investments. Indeed, the number of plan sponsors selecting to outsource their company plan to a master trust, also known as a multiemployer plan, is expected to triple in the next five years, according to a survey of 200 U.K. DC plan executives published by consultant Aon PLC on Feb. 18. Assets in U.K. master trusts will reach £424 billion ($549 billion) over the next decade, according to an estimate by London-based data and analytics provider Broadridge Financial Solutions Ltd.
That's because retirement plan trustees are faced with ever-increasing regulatory requirements, while master trusts are well-positioned to benefit from outsourcing, noted Alistair Byrne, London-based managing director and head of Europe, Middle East and Africa pensions and retirement strategy at State Street Global Advisors Ltd. For example, on March 4 Fujitsu Ltd. outsourced its £730 million defined contribution plan for its U.K. employees to Willis Towers Watson's master trust, the £7.5 billion LifeSight.
"We will see a continuation of moving away from employer-sponsored plans to master trusts as well as other types of multiemployer provisions," Mr. Byrne said in a telephone interview.
And as single-employer defined benefit plans continue to disappear, "individual emphasis will become much less common," he said.
Future consolidated retirement plans, sources said, will feature:
- More impact investments.
- More sophisticated or multiple decumulation strategies.
- Investments in private markets.
- Plan consolidation enablers such as dashboards.
Sources said adding more groups of participants into the mix, including self-employed workers and part-time worker earning below £10,000, will further boost multiemployer plans' assets. Zoe Alexander, London-based director of strategy and corporate affairs at the £10 billion ($13 billion) multiemployer defined contribution plan National Employment Savings Trust, London, said the U.K. government's intention is to phase out the minimum salary threshold that is currently stopping part-time workers from being captured by auto enrollment.
"The best way to include women working multiple jobs and earning £10,000 a year is to lower that trigger," she said. Ms. Alexander added that the removal of this barrier could also apply to the self-employed, whose monthly incomes vary. The U.K. auto-enrollment program is expected to be next reviewed by the government in the mid-2020s. Currently, part-time and self-employed workers can voluntarily invest through NEST.