Not a job for the boys
Of all the duff jobs out there, being Chair of the Phoenix IGC must rank high in the pantheon.
Phoenix is a shell company that over the years has acquired a number of life insurance companies , including names like Scottish Mutual, London Life, Pearl, Sun Alliance , Britannic Assurance and Alba Life.
These are not the grottiest life companies this country has seen (we’ve yet to encounter the IGC reports for the likes of General Portfolio and Target Life) but this “book” of business is pretty derelict.
The Chair’s report is clear about what gets you value for money – and it’s money!
From our investigations, the size of your pension pot is the single biggest factor in getting value for money. The longer you pay in and the more money you pay in, the bigger your pension pot, and the lower the impact of charges on your savings.
Unfortunately there is not much money around at Phoenix, at least not in the member’s pots
90% of the pots under IGC Chair David Hare’s scrutiny are not getting further contributions and the average pot size of the policy’s he’s looking at is less than £9,000.
If the primary role of an IGC chair is to get value for money for policyholders then you can see why the Phoenix IGC has got its work cut out for them.
Success or failure – an heroic start
The report does not beat about the bush, like the crushing chord at the start of a Beethoven Symphony, it announces itself
The report plays out with similar directness (in marked contrast with the “canny” style of Standard Life’s report). This is a report that is designed to be read by the Workplace Pension Scheme Member and it is full of graphics that keep us reading. I whizzed through the 22 pages of well set pages and enjoyed the experience.
Every IGC report should aspire to this degree of accessibility and whether through the congruence of minds or because David Hare is actually listening to this blog. He has adopted a way of explaining where he considers members are getting value for money and where they are not.
I may not agree with that swathe of green at the top (see below) but I get the picture.
In terms of tone and engagement, this is easily the best report of those published so far and sets the benchmark for future reports.
Heroic and so far – not great
Frankly Phoenix was set up to make money out of small pots and as we have seen, that is not something that lends itself to “value for money” for pot-holders. Hare states that his IGC has “looked and listened , and..is satisfied that the culture of Phoenix is one of improving …experience and managing …expectations”. Though the IGC has been impressed with Phoenix’s commitment to customer care, the report stops short of stating that Phoenix is delivering value for money.
The “not great” in the title of this section refers to a decision taken by Phoenix to waive ongoing scheme charges for the next 12 months for the 21 schemes where members are younger than 54 , have no money going into the pot and have pots of less than £5k.
To my mind this is far short of a proper solution to the problems with value for money and I am quite sure, knowing the IGC members, that they know this is not great. This book is in a mess on charges and Phoenix and their shareholders appear to me to be on a collision course with the IGC which should see some very tough talking in 2016.
Allowance for the sea of green
While I have been tough on Royal London, Prudential and Standard Life for their rather feeble approach to investment analysis and their pretty well non-existent recognition of the importance of investment governance , I am going to give Phoneix’s IGC an allowance.
They need to be focussed on the acute issues surrounding the charges members are paying and the relatively light touch they are giving to retirement and investment issues is understandable.
The IGC is on a different trajectory and should stick to the red and amber, there may be too much green at the top of the pie but that is a problem for 2016 and more properly the years to follow.
Fighting the right fights.
15% of Phoneix’s workplace pension membership are subject to exit penalties, that’s a much higher percentage than with other IGCs and reflects the nature of these books which have a high amount of “legacy” (eg pre-stakeholder) policies.
I agree with the IGCs decision not to get stuck into Phoenix on exit penalties, the Government will fight that fight for them through the FCA.
One area that the IGC needs to address is the increasing rancour Phoenix is creating in the advisory community with its tough stance on transfers. These issues have flared up this week and have been widely reported.
The Phoenix approach to looking after all policyholders as orphaned from advice is creating difficulties with genuine advisers. While I applaud Phoenix for their efforts to stop pension liberation fraud, I suspect they could do more to help IFAs who are trying to do the right thing. I hope that the Phoenix IGC can do work to make this happen.
How does the IGC report fare overall?
While facing a thankless task in terms of meeting its goals in 2015/16 . this report demonstrates a member/policyholder centric focus that I really liked.
I don’t think that the IGC can cure the problems on the pie chart that appear in amber and red, that is down to Phoenix and the Government , but I would be very happy, were I a policyholder that I had an IGC that was not going to take its foot off the life co’s neck.
In giving the Phoenix IGC high marks, I accept that I am ignoring the weakness of their investment and at retirement analysis, I would hope for more next year. But overall, I think Phoenix’s IGC and especially its chair should be proud of this work.
- The position the IGC was adopting to value for money, and in particular, the assessment of value for money benchmarked against best practice gets a green
- The tone of the document, especially whether it demonstrates it is written for members (rather than to please those who pay the IGC’s bills or the Regulators), gets a green
- Its capacity to address specific issues with the provider where member’s issues might be prejudiced gets a green – (but more needs to be done on investment next year)
Finally – a word on transparency
I’m pleased to see this statement appearing at the end of the document and that the Statement makes specific support to the work of the Transparency Task Force. Margaret Snowden – who is on the Phoenix IGC – has joined the TTF and the TTF is the better for it.
The sooner the TTF and the IGCs start working better together the better and I hope that we sill see more IGC boards working with the TTF as Phoenix clearly intend to do.