A shocking lack of care
Share Action has released this morning its findings into the care taken by leading master trusts and contract-based providers investing our money.
The report called “Reclaiming Ownership” makes shocking reading. Of the 11 providers surveyed, none even got to 4 out of 10. One provider didn’t get to 1/2 out of 10 and the great hope of the Government – the standard setter-NEST – scored less than 3 out of 10.
The phrase “could do better” doesn’t apply. The survey shows that despite the world turning its attention to better governance, transparency, climate change, human rights, labour rights, corporate tax-paying, executive remuneration, arms policy, extraction of minerals and power generation….Britain’s great long-term investment institutions are woefully behind the curve.
I shared these findings yesterday with a close friend whose texted response I will publish in full
What is this communist nonsense?
Seems obsessed by climate change – it seems to be on every page
On basis of what I’ve read I would invest in the bottom fund and never invest in the top rated one!
He/she remains a friend; this attitude will probably resonate with the vast majority of people in pensions who still think that the less attention paid to ephemera like ESG, the greater the return to the investor.
Not only is this belief wrong in itself, it is indicative of how out of step we have become with a wider world which has moved on. The Paris Treaty signed last December is not just a piece of paper, it makes a material difference to the way that industry works and that includes the pension industry.
But to the report
The report is long and immensely diligent. It is not an easy read but I have read it all. If you want to read it yourself, here is the link.
There is an executive summary on pages 3-5 which is succinct and makes the main points needed. The output of the report that people will pick up on is the overall league table of scores.
Does this make sense?
Despite being on Share Action’s “panel of experts”, I had no part in the research or the writing of the report and I have not commented to Share Action other than to send them some stuff on ownership published by L&G which shows it is thinking of getting better.
But the report is remarkable in tallying with the investment rankings on http://www.pensionplaypen.com , which are created by First Actuarial which has (other than through me) no inter-action with Share Action whatsoever.
The People’s Pension should be particularly aware that not only does it come bottom of the Share Action rankings, but it comes pretty close to bottom on Pension PlayPen’s investment ranking. For all its superiority in terms of inter-operability with payroll and its success in getting new business, People’s Pension and its parent B&CE remains, in our opinion, a train crash when it comes to the investment of its member’s money.
I have written consistently about the failings of People’s to properly consider the governance of its investment policy. The recent appointment of State Street Global Advisers – actually increases our concern about the lack of ownership of this problem.
If People’s should look to their mettle, so should its principal rivals in the Master Trust sector – NEST and NOW pensions. Both have been smug about their investment governance and though both are considerably better than The People’s Pension, neither have got anything to crow about. While you have to leaf through to pages 58-9 of the report to find the problems, I hope that Otto Thorenson and Nigel Waterson are paying attention.
The big theme
If there is one theme that runs through the report it is that there is insufficient ownership of the way monies are invested and assets invested into are monitored and managed. Only NOW of the providers surveyed directly involves itself in the process, all other providers delegate the investment to third parties, even if those third parties (for Aviva, L&G and Standard Life) are part of the group. Both Aviva and Standard Life’s investment arms themselves delegate much of the fund management to others so the levels of accountability for what is going on is so diluted that Trustees or IGCs have difficulty knowing what is going on and who is responsible for it.
This shocking abnegation of control, responsibility and accountability is present even with NEST who are shown to have virtually no strategy as regards the record of invested companies in Remuneration policy, Power Generation, Arms, Deforestation, Extractive Industries …I could go on.
Why this matters
Talk to your kids, they are more aware of these issues than you , care more about them than you and they are the people for whom auto-enrolment and long-term savings really matters. You may be like my friend and mock all this stuff, but your kids may not find you funny (just as I don’t find my friend funny – at least on this).
The world is changing, it has to or else it will deteriorate fast. Investment management is not changing as fast as it should and that is largely because those entrusted with managing assets are not engaging with the key issues associated with governance outlined in this report.
It matters to Share Action and it matters to me and my family as investors. It matters to a consultancy like First Actuarial who downgrade organisations like People’s Pension for its pathetic lack of engagement in any of this. It matters to Pension PlayPen whose scores reflect the findings of Share Action’s reports.
Ultimately, it is only when people who have influence over how other people think, those in senior positions in the management of providers, on the IGCs and trustee boards that oversee those managers take notice and take action- THAT THINGS WILL CHANGE.
So if you are one of those people, read this report, this may not matter to you directly but you have the stewardship .
And if you are not one of those people, but someone whose money is invested in the funds of these big pension providers, then this matters to you directly. You have every right to be angry at the lack of action of your stewards and you should be demanding better.