What is Master Trust (Pension)?

Full Definition

A Master Trust is a single trust-based occupational pension scheme used by many different, unrelated employers at the same time, each of whose staff are enrolled into their own section of the same overall trust, rather than each employer setting up and running its own separate scheme. This shared structure lets even very small employers, who could not justify the cost and governance burden of running a standalone trust-based scheme, offer their staff the benefits of trust-based governance -- an independent trustee board acting solely in members' interests, oversight of investment strategy and charges, and economies of scale that typically keep charges low -- which is why Master Trusts, including NEST, NOW: Pensions and a number of commercial providers, have become the default route many employers use to meet their automatic enrolment duties. Following a period in which several smaller Master Trusts exited the market, often prompted by the cost of meeting tightened standards, Master Trusts operating in the UK must now be formally authorised and are more closely and continuously supervised by The Pensions Regulator than a standard single-employer trust scheme, covering areas such as the fitness and propriety of those running the scheme, its systems and processes, and financial sustainability, including a requirement to have a plan in place to protect members if the Master Trust were ever to fail or wind up. Employees moving between different employers who each use the same Master Trust can sometimes keep contributing to the same underlying pension pot without needing a formal transfer, which can simplify pension continuity for people who change jobs relatively often.

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