Defined benefit pensions schemes and master trusts

Final salary pension schemes may be a legacy of a more generous time, but they remain a balance sheet issue for finance directors amidst deficit warnings and consolidation risks. Adrian Cooper, head of direct distribution, TPT Retirement Solutions, considers whether master trusts are the right approach

Finance directors have one of the hardest jobs facing UK plc in today’s uncertain economic environment. They are responsible for keeping the promises their companies made to generations of final salary or defined benefit (DB) pension scheme members.

DB pensions schemes may seem a historical anomaly, but there are still 5,450 in existence today.

The introduction of auto enrolment pensions means that DB is fast becoming a legacy issue – the fact is defined contribution (DC) is rapidly overtaking DB. In 2018, employee contributions into DC (£4.1bn) exceeded DB by a third (£3.2bn). With the increase in contribution rates, that will grow rapidly.

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