Workplace personal pensions vs master trust: the case for each

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Employers need to exercise careful judgement in deciding whether workplace personal pensions or a master trust would be the right option for their scheme members. But what’s the evidence you need to weigh up before delivering your verdict?

What the two schemes have in common

Workplace personal pensions (WPP) and Master Trusts are both defined contribution (DC) pension schemes. They work by building up a pot of money during someone’s working life, to be used in later life when income is reduced.

The amount that a person accumulates in a DC pension scheme, and gets to spend enjoying later life, depends on three things:

  • the amount paid in,
  • investment returns, after costs and charges have been deducted
  • the decisions that are made, especially at retirement

The same three things apply regardless of whether the scheme is a WPP or a master trust. Each can be optimised regardless of the type of scheme.        

What sets them apart

Governance and regulation

This is the main difference between the two scheme types. Master trusts have a board of trustees who are obliged – by what’s known as a fiduciary duty – to act in the interests of the scheme members. The scheme is regulated by the Pensions Regulator.

WPPs, on the other hand, are regulated by the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA). It’s the scheme provider who shoulders the governance responsibility, with oversight from an Independent Governance Committee.

This doesn’t mean that governance has to pass entirely out of the employer’s hands. Employers, supported by their advisers, may also have their own governance committee.

What’s important, of course, is what these governance and regulation measures deliver for the scheme members themselves.  


Master trusts can be set up without the need for authorisation by the FCA or PRA. Neither do they need to comply with Solvency II, which sets capital requirements for banks and insurance companies, designed to reduce the risk of insolvency. The opportunities created by automatic enrolment and consolidation, combined with the relatively capital-light requirements of master trust have resulted in significant growth in the master trust market in recent years.

In response to the growth in the market, master trusts authorisation was introduced. The authorisation regime is designed to improve sustainability, to ensure that members’ benefits are protected should a master trust fail, and to ensure an orderly transition to a new scheme.

Master trusts that invest through FCA regulated products, in the same way as the Aviva Master Trust, can benefit from the protection afforded by the FCA and PRA, as well as the Financial Services Compensation Scheme.

For all master trusts, it’s worth looking for signs of a long-term commitment from the scheme sponsor, and evidence of a realistic and sustainable business plan. 

Member communications 

The aim of WPP and master trust providers should be the same, to deliver clear information, at the right time and in the right format, to enable good decision making. There’s also a need to make communications engaging. Digital communications, online self-service solutions and apps that allow mobile access all have a part to play in getting employees to gain – and keep – a real sense of involvement.         

Aviva, for instance, helps keep members engaged through ‘nudge’ communications – triggered at particular life stages or by specific events. These are complemented by ongoing financial education, and easy management via the My Aviva and My Workplace Apps. All of this is regardless of the scheme type chosen.


An important fund in a workplace pension in the default fund, its where most employees will invest. Aviva’s approach is to offer default solutions across both Aviva Master Trust and WPPs. These benefit from the scale, internal expertise and governance of Aviva – as well as the oversight of the IGC, the Aviva Master Trust Trustees and their professional advisers. Master Trust members can access details of their Trustees' investment strategy online. This includes how Trustees manage risks and opportunities associated with climate change.

There’s no difference in the wider investment options that can be offered, though WPPs will usually offer the broader fund range. This is because trustees are required to deliver a greater degree of scrutiny, so consequently master trusts’ fund ranges tend to be smaller.

Of course, not every scheme member wants – or would feel able to evaluate – a wide fund choice so a smaller fund choice may suit some employees. Employers, guided by their advisers, are best placed to understand the breadth of choice that might best suit their workforce.      

The role of the employer

An employer’s regulatory responsibility is limited to automatically enrolling relevant employees and paying the right contributions, on time.

Beyond these requirements, employers can decide how much or how little they want to be involved, always recognising that the pension scheme will usually represent a significant employee benefit.                         

WPP and master trusts are both multi-employer schemes and so scheme level governance can’t deliver detailed evaluation against individual employer goals. Many employers set up their own governance committee to add this layer of employer level oversight. Activity might include feedback to the provider, or trustees. It could also encompass employer-level investment choices, or the provision of additional communication or financial education, tailored to the specific needs of their employees. 

The benefits of scale

The Department of Work and Pensions has recognised that larger pension schemes tend to offer better value for members. But it’s important not to just equate bigger with better. Economies of scale can improve sustainability and increase the amount available for investment. They might also be reflected in better investment returns net of charges. But all of this depends on the decisions of the WPP provider, or the master trust Sponsor and Trustees.

Aviva looks after over £80 billion assets held in workplace pensions and can leverage economies to deliver investment in both our WPP and master trust propositions, as well as the investment solutions they offer.

The final verdict: which is best?

This is rarely a clear-cut case. Good outcomes are dependent on the proposition, rather than the underlying product type and results aren’t dictated by the regime that applies to a scheme. Both WPPs and master trust can deliver excellent results for scheme members.

Employers deciding on a new scheme shouldn’t start with the assumption that either one is necessarily superior to the other. Instead, they should draw up a list of what they require from their scheme and which features their employees are most likely to favour. 

Which is judged to be the better choice will vary from one employer to another, depending on their workforce’s needs. The key is to get professional advice.

Advisers will have a wealth of experience in meeting the needs of a wide variety of employers and their employees. They will understand the relative merits of the different regimes and crucially the relative merits of each provider’s solutions. By matching your needs with the right pension scheme, an adviser can help you secure a long-term, valued benefit, and a more secure future for your employees.

Interested in finding out how a workplace pension could work for your company? Take a look at our workplace pension page to see how we can help you give your employees a better future.

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