Credit Suisse DC scheme moves more deferreds to master trust
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The Credit Suisse Group (UK) Pension Fund is moving a tranche of deferred members in its £1.1bn defined contribution section to the Fidelity Master Trust, citing value and greater flexibility around retirement options.
Some DC members – those the trustee thinks would benefit from the change – have already been moved to Fidelity, selected in 2023, and “we plan to move more DC members in September 2025”. mallowstreet understands there has been more than one bulk transfer since 2023.
Others will remain in the Credit Suisse scheme for the time being as they have specific benefits that require “more detailed planning”, according to the scheme.
The move of DC members to a master trust comes after the defined benefit section, which boasts a substantial solvency surplus, was bought in by Legal & General last year.
How DB interacts with DC consolidation
DC consolidation is continuing amid an ever increasing governance and regulatory burden, and therefore time and cost, around own trust schemes. Moving the DC assets to a master trust significantly reduces operating costs, which are often paid by the employer, says head of DC at Barnett Waddingham, Mark Futcher.
He also notes that it is “fairly typical” for companies to outsource their DB and DC schemes around the same time.
A lot of the operating costs of a pension trust tend to be with the DB scheme. “If this is secured via a risk transfer to an insurance company, then the trustees and sponsoring employer can move to a more streamlined operating model for governance,” he explains.
Consolidation of DC schemes saw a slight pause due to DB schemes finding themselves in surplus and many employers using this to fund DC contributions. However, planned legislation to let ongoing DB schemes release surplus above a low dependency ratio could change this.
“Given the pension schemes bill and the likelihood of employers being able to use this surplus in other ways, we believe that this 'pause' will stop and consolidation will continue,” Futcher predicts.
The drivers for DC consolidation go beyond cost, said Kelly Newton, a client director at trustee firm Vidett, citing a better service to members, amid fast technology improvements that a large provider will be better able to offer.
Once the decision to move to a DC master trust or provider is made, employers and trustees should look at what the long-term strategies are for the schemes they are shortlisting and how they have built the outcome of the Pensions Investment Review into their future plans, she advised.
"Understanding whether each shortlisted master trust is on track to meet the transition pathway is a great place to start the conversation, but different employers and trustees may well have differing views on whether making a ‘once and done’ decision is vital for them, or whether trusting in the government's long-term strategy for DC schemes - which may lead to a future consolidation affecting their members, and where they have little influence - is palatable," Newton said.
The drivers for DC consolidation go beyond cost, said Kelly Newton, a client director at trustee firm Vidett, citing a better service to members, amid fast technology improvements that a large provider will be better able to offer.
Once the decision to move to a DC master trust or provider is made, employers and trustees should look at what the long-term strategies are for the schemes they are shortlisting and how they have built the outcome of the Pensions Investment Review into their future plans, she advised.
"Understanding whether each shortlisted master trust is on track to meet the transition pathway is a great place to start the conversation, but different employers and trustees may well have differing views on whether making a ‘once and done’ decision is vital for them, or whether trusting in the government's long-term strategy for DC schemes - which may lead to a future consolidation affecting their members, and where they have little influence - is palatable," Newton said.
How should scale be measured?
With a new requirement for multi-employer default funds to reach £25bn by 2030, many expect there to be a number of mergers and acquisitions along the way; trustees of own-trust schemes choosing a master trust will need to keep this in mind.
However, Futcher notes that many providers which run both trust and contract-based products have their infrastructure aligned for efficiency purposes, and says he wants to see this reflected in the new megafund legislation.
“We believe that a provider’s workplace DC book provides scale, not the individual products," he says. “We are keen that regulations take this wider book into account.
While the government has focussed on asset scale, he argues it is administrative scale and efficiency that are more important.
“Whilst assets drive income for providers, it is the number of members that drive cost,” he says, adding that consultants “are fairly clear on which providers are likely to be here for the longer term”.
Fidelity’s default option for UK workplace DC clients, FutureWise, was worth roughly £16.9bn in November last year and moved from a lifestyle to a target date fund structure in recent years.
Do own trusts planning to consolidate already take into account the pension schemes bill’s potential effect on the DC market?
