Employers embrace master trusts

While traditional employer sponsored superannuation is on the decline, more and more firms are moving to master trust structures as an alternative.

Thursday, January 20th 2000, 12:00AM

While traditional employer sponsored superannuation is on the decline, more and more firms are moving to master trust structures as an alternative.

Firms offering master trusts in the corporate market are reporting strong growth. AMP, which manages the New Zealand Retirement Trust (NZRT) says that in the December quarter it passed the $600 million mark in funds under management after just four years in operation.

This strong growth is being experienced by other players in the market as well as those offering retail master trusts. Good Returns will next week be publishing its quarterly survey of retail master trusts which reveals the extent of growth in this market.

AMP Employee Benefits Manager Linda McCulloch expects NZRT's growth will accelerate as employers who sponsor superannuation offer staff with salaries in excess of $60,000 pa the opportunity to increase their savings for their retirement at a lower rate of taxation.

NZRT’s growth also signals employers are rejecting traditional single-employer superannuation schemes in favour of multi-employer schemes.

According to Government Actuary estimates, over 5,000 New Zealand employers now provide superannuation via a master trust. In 1998 alone, the number of single-employer schemes declined, while employers joining master trusts increased by 22 per cent.

Linda McCulloch says there are many reasons for the rise in multi-employer schemes: "Employers recognise that as members of master trusts each individual can choose how their funds are invested, and the level of risk they are prepared to take.

"Also, fees of master trusts are significantly lower on average than traditional, single-employer schemes or for personal savings plans.

"Legal compliance becomes the responsibility of a professional trustee company; the invisible cost of staff involvement and liability is removed, and employers and employees are able to focus on their core business."

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