The Pension PlayPen has been asked to outline the research process that lies behind the Factsheets and provider ratings on www.pensionplaypen.com . This is the process.
The purpose of Pension PlayPen research is
- To establish the universe of pension providers in the market
- To qualify that universe to a researchable list of credible providers
- To analyse the offerings of each provider according to 6 metrics
- To present this information in a way that makes sense to people who don’t do pensions for a living
To establish the universe of pension providers in the market
We know of 72 providers prepared to operate a workplace pension scheme that qualifies for auto-enrolment. These fall into three broad categories
- Providers actively looking for new business with national scope
- Providers actively looking for new business with limited scope
- Providers not looking for new business but looking to convert existing plans to qualifying plans
To qualify that universe to a researchable list of credible providers
Our view is to research all providers in (1), credible providers in (2) and not to research providers in (3) unless specifically asked to (where we are being paid for the research).
We do not charge any employers for the research we undertake and we endeavour to be entirely independent in our work.
To analyse the offerings of each provider according to 6 metrics
At the heart of the research process are 6 metrics we think important in helping an employer to decide on the pension provider for its staff
- Cost; we look at the headline AMC of the default investment option. We do not take into account (here) the other investment costs (fund expenses) as these are analysed in the investment metric. The lower the headline cost, the higher the value we give to the provider’s proposition
- Payroll and HR integration; we continue to develop a sophisticated monitoring service that takes feedback from over 50 payroll software providers on the compatibility of each provider to its software. The aim is to provide a software specific rating. Currently we provide general ratings for each provider which are not software specific – the upgrade to software specific is expected in November
- At retirement; we look at the options currently available from providers including in-house annuities, open market annuity process, income drawdown and we take a view on their likely adoption of the new options available from 2015. We use feedback from employers to establish the quality of the service offered.
- Investment; we use a specialist division of First Actuarial for investment analytics; it has developed a complex rating system of its own based on value for money which looks at both the costs of the fund management (in totality), the investment process, the statement of investment principles, the asset allocation and the quality of the fund management team in assessing the likelihood of the fund meeting its target. We then assess whether the fund’s target is appropriate for the job.
- Employee services; this metric looks at the capacity of the provider to offer meaningful information and tools necessary for members to make informed decisions on contributions, fund selection, at retirement options and any special features of the plan which require member choice. The latter might include salary sacrifice, boult on life cover or even corporate wrap.
- Durability; this rating looks at the sustainability of the provider’s business model. It analyses the appetite of the provider to stay in the market, its marketing, the success of its marketing, its financial position and the stress that its business model will come under as numbers of new schemes increase. Finally we look at the quality of the Governance infrastructure that underpins the plan
These six metrics are delivered to our external researchers who analyse each provider in the same way to ensure consistency. We use the First Actuarial DC research team in this. This team consists of five dedicated individuals who have individual specialities including, investment, investment strategy, administration, member benefits, risk monitoring and governance.
Research on each metric for each provider is recorded as a score and a piece of narrative. The score and narrative form the basis of a star rating system operating for customers of Pension PlayPen who have paid for research. This research is updated every quarter and more often where a major change in a provider’s proposition is announced.
First Actuarial are a well-regarded pension consultancy who own 30% of Pension PlayPen. They use the same system for rating providers with their own clients and this creates economies which keep Pension PlayPen prices down.
Outsourcing to First Actuarial is important to us, it help us avoid conflicts of interest. Those providers who advertise with Pension PlayPen do not- by dint of advertising influence First Actuarial whose business is sufficient in scale not to be tempted by advertising as an inducement.
We reserve the right to remove First Actuarial and replace them with another research unit. First Actuarial are paid by Pension PlayPen for each use of their analysis.
To present this information in a way that makes sense to people who don’t do pensions for a living
The core data provided to us by First Actuarial is converted into simple to understand info graphics by the Pension PlayPen design team. These infographics contain the narrative and the ratings provided by First Actuarial, they also contain background information on providers that encapsulated the key pieces of information we would expect employers to want to know about the organisation running their workplace pension.
An example of such an infographic is in posted below- the information in this infographic is for illustration purposes only. It is not a current infographic and the information in it should not be relied upon.