The member benefits of market consolidation

It would seem ‘consolidation’ is presently the word on every pension professional’s lips. A red thread running through Chancellor Jeremy Hunt’s 2023 Mansion House speech and Autumn Statement, the Regulator recently acknowledged the impact of market consolidation in undeniably stark terms: 

‘The pensions landscape is rapidly evolving towards a competitive marketplace of fewer, larger schemes… present(ing) different risks and opportunities for savers and the economy alike.’¹

That consolidation creates both risks and opportunities cannot be overstated. And whilst the commercial benefits should be obvious enough, moving thousands of savers from one pension provision to another has the potential to be very, very disruptive. From the perspective of savers, are the potential rewards worth the short-term pain? And is there a way of avoiding said pain altogether?   

In this short commentary, we look back at our acquisition of the Atlas Master Trust—a deal we completed in 2021. In doing so, we argue firstly that consolidation within the master trust marketplace can improve member outcomes, and secondly that consolidation doesn’t necessarily need to be disruptive. A robust transition process is all it takes to bridge the void between one provider and another. 

Master trust market consolidation: Top-three potential member benefits

Before getting into the details, it’s worth reiterating what consolidation—and master trust consolidation, specifically—means for members. Here are the top three benefits, as we see it:
 

#1 − The stability of a truly committed provider

The process of acquiring a master trust is far from easy (take it from us!) As such, providers looking to grow through acquisition are not just expressing ambition, they’re expressing a significant commitment to the market. 

This should provide some peace of mind. Joining a master trust that’s made this kind of commitment reduces future uncertainty—incoming members should be confident that their new provider has every intention of being around for years to come. 

#2 – The potential for better net investment returns

The larger the master trust, the greater the economies of scale at play. As a master trust grows in assets under management, the provider stands to negotiate better third-party rates, reducing their overheads. These cost savings can then be passed down. 

This is as important for legacy members as it is members joining a new master trust post-acquisition. Any fee reduction could enhance net investment returns, leading to better retirement outcomes for all. 

#3 – The best of two master trusts in one solution

Acquiring a master trust isn’t about doing away with everything that made that master trust unique. More often than not, the process offers a provider the opportunity to develop and enhance their proposition. 

Taking a ‘best of both’ approach not only ensures a degree of continuity for incoming members, it can just as easily lead to service improvements for legacy members.   

Interested in finding out more?

¹‘The Pensions Regulator makes strategic shift in its oversight of the workplace pensions market’, The Pensions Regulator, 22 February 2024. 

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