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L&G plans to join master trust trend

Legal & General is looking to follow Xafinity into the multi-employer trust-based pension market and predicts an explosion of similar launches from rival providers.

Standard Life says it is planning to rejuvenate its existing master trust while Aegon and Aviva have not ruled out launching their own.

Xafinity launched its master trust, Xafinity Pensions Trust, last week. XPT has one set of trustees and administrators overseeing all participating employers’ benefits.

L&G says auto-enrolment will make occupational schemes more attractive than contract-based group personal pensions because they allow contribution refunds. It says a multi-employer trust-based product will be attractive due to the low costs.

Wealth policy director Adrian Boulding says: “I think Xafinity is the first of many master trust launches.

“The employer will get a juicy refund of contributions which will reduce their pension costs and the economies of scale mean this is significantly cheaper than going it alone. This is something we are looking closely at.”

Standard Life head of pensions policy John Lawson says: “Occupational schemes are outside the scope of RDR so will be attractive to employers. I think master trusts have a bright future.

“There is no sign the Government is about to reverse the legislation allowing refunds but it does look like a bit of a loophole. The whole point of auto-enrolment is to get people saving so allowing refunds could undermine that.”

Aviva pension spokesman Edmund Downes says: “If there is a clear advantage in having a master trust, we will not be left behind.”

Aegon head of corporate marketing Neil Davis says: “We are considering the master trust route as an option but have not made any decisions.”

Friends Provident has ruled itself out of any launch but Lawson says providers steering clear of this market will be handing volume to competitors.

Hargreaves Lansdown pensions analyst Laith Khalaf says: “The Government is keen to clamp down on behaviour that damages pension prospects of workers and could move to close off this route if refunds increase substantially.”

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