Utilities company Thames Water is planning to transition its defined contribution (DC) stakeholder arrangements to the Aon MasterTrust.

Thames Water is the UK’s biggest water and wastewater services provider and its DC scheme has about 5,000 members.

By entering the Aon MasterTrust, Thames Water’s DC members will have access to an arrangement “that offers better value, greater flexibility and enhanced features”, Aon said in a statement. 

It said there will be a reduced administration charge and an enhanced investment offering managed by Aon’s fiduciary team. 

There would also be easy access to a full range of flexible retirement options in addition to online tools and modellers to help members plan savings and retirement options, including full app and mobile support.

Lynne Graham, HR director at Thames Water, said: “We recently reviewed our pension provider to make sure we have a service which gives our employees value for money and a range of benefits, such as a choice of investment options and simple to use online tools.”

“We wanted to offer our members access to the best plan available with a good pension outcome on retirement and we’re delighted to have agreed a new partnership with Aon.”

Tony Britton, head of UK DC solutions at Aon, said: “We have seen a real market shift with master trusts becoming increasingly popular DC vehicles. Our own master trust has shown significant growth since going live in 2017, and, including clients that are currently onboarding, we now have over £2.5bn (€2.7bn) of assets committed across our DC range.”

Buyout deals increasingly popular long-term objective

Almost half (49%) of UK pension schemes are now targeting buyout as their long-term objective, up from just 15% four years ago, according to a survey conducted by Hymans Robertson.

The survey, which was of 100 defined benefit (DB) pension scheme trustees, also showed that in the same period the number of pension schemes aiming for self-sufficiency as their long-term objective fell to 37%, from 81% four years ago.

The remaining 14% of pension schemes said they were targeting a form of consolidation as their long-term objective.

According to the consultancy’s half year risk transfer report, £25bn (€27.3bn) of pension scheme risk was insured in the first six months of 2020 and 40% of FTSE100 companies that sponsor DB pension schemes have now completed buy-ins, buyouts or longevity swaps.

James Mullins, head of risk transfer at Hymans Robertson, said: “This growing demand from pension schemes means that, even with the additional challenges posed by COVID-19, we expect the total number of buy-ins and buyouts in 2020 to increase from the 153 transactions seen in 2019.”

He said, however, that the lower number of multi-billion pound buy-in transactions this year meant that Hymans expected the average transaction size to be lower than the £286m seen in 2019.

“So the total transaction value in 2020 for buy-ins and buyouts is likely to be around £30bn, which is around two-thirds of the 2019 total of £43.8bn,” he said.

“Our trustee survey shows that pension scheme enthusiasm for buy-ins and buyouts continues to grow and we expect demand to average £37bn a year over the next decade,” he added.

*Hymans Robertson’s annual Trustee Barometer surveys 100 trustees of private DB pension schemes with assets under management greater than £50m. The survey is carried out by a third party and all responses are confidential.

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