How can IGCs engage people with their pensions?

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There are three measures by which I am judging the IGC Chair reports

  1. Do they speak with a proper tone of voice
  2. Do they show themselves effective in dealing with the provider they are governing
  3. Have they properly addressed whether members are getting value for money.

But there is a fourth dimension- it doesn’t take Einstein to work out that the fourth measure is the capacity of the IGC to get itself noticed.

To be honest , some of the reports do not merit getting noticed. You can read my assessment of each report (as I get it) in the Pension Plowman’s  Directory of IGCs and make your own mind up which reports I’m referring to.


The IGCs are the Formula One of DC governance

But even the most feeble IGC reports are better than no report at all. Compared to the comparable reports being put together by the Chairs of Occupational Trusts and even the the shelf efforts of the GAAs, these IGC reports are “Formula One”.

What plans does the FCA have to promote these reports to their natural readership, the policyholders of the GPPs reported on?

I don’t have any answer to this. Checking the FCA website, the Financial Conduct Authority has been very quiet on IGCs since Martin Wheatley’s departure. The last serious policy statement promoting the IGC was made by Wheatley nearly a year ago. The then FCA referred to the business of engaging, educating and empowering people to better manage their finances as “The Defining Challenge of our Time

 those offering, or arranging workplace pensions do not, frankly, live under the same existential threat as their predecessors. There’s less pressure to perform from employers, so questions over charges, basis point differences between 0.5pc or 1pc say, suddenly look far less confronting priorities.

Now, this, of course, is a particular worry today because as returns to investments fall, small differences in charge rates become correspondingly more important to employees final pension pot, as indeed they should be important to those managing these funds.

Wheatley makes it very clear that the Government cannot rely on small employers to do the e job..

Clearly, the situation you have at the moment, where something like £30bn of contract, and bundled trust-based assets in workplace pension schemes, are estimated to be at risk of being poor value for money, is an unsustainable one.

Add to this, the fact that there’s often a lack of capability here,  so in occupational, or employer organized contract-based schemes, a firm’s trustees may be professional engineers, say, or advertising executives, not pension experts – and you quickly run into some very significant concerns over quality standards

Wheatley stops short of mentioning the fact that the majority of employers staging after he spoke (April 2015) don’t have a workplace pension or any culture of providing benefits for retiring staff. The link between IGCs and the growing crisis in pension governance resulting from auto-enrolment is implicit, not explicit.


What has happened since Wheatley’s departure?

The IGCs were promised (in Wheatley’s speech) support from the IGCs.

the FCA will be offering practical support and guidance to IGCs over the coming months (particularly those without technical expertise) to effectively manage funds for their policy holders up to the point where they then use their new freedoms

A consistent complaint in IGC Chair Statements is that the IGCs have not received this support, most notably in helping them understand the costs within the policies necessary for them to make meaningful pronouncements on whether value for money is being had.

As worrying, the IGCs are being published into a promotional vacuum with no platform on either the Pension Regulator or the FCA’s website to showcase these reports. It has been left to an independent blogger to pay these important reports attention.

The providers themselves (quite properly) do not see it as their job to promote the IGC Chair Statements in an active way. These reports are not supposed to assist insurers and SIPP providers in promoting themselves (though some of the reports are little more than financial promotions).

The IGCs do not have, within their budgets, any scope to get their statements to their policyholders and I have not read one paragraph in the 15 reports I’ve analysed that talks of how these reports are likely to be found by the people for whom they are written.


Will the Pension Regulator promote IGCs?

These reports are generally well written, engaging and contain important information which is the interest of policyholders to read. They are (generally) independent and give a genuinely unbiased assessment of what is going  and the IGCs are reporting on what has been a genuine improvement in the policyholder’s outlook in terms of DC outcomes.

The FCA’s lack of interest may be because it does not feel it should be stepping on the Pension Regulator’s toes, but the Pension Regulator- which is in charge of workplace pensions and the introduction of auto-enrolment, seem powerless to promote an FCA initiative.

The IGCs find their reports falling into a Regulatory black-hole into which both the FCA and tPR seem unwilling to look. This is shameful – both Regulators have the power, the money and the capacity to promote IGCs and their statements and their failing to do so could be a major setback to the cause of “restoring confidence in pensions”.

 

Why this matters.

If the Regulators fail to promote IGCs they play into the hands of the insurers and their trade associations – the ABI and the Investment Association. The ABI and IA would be only too pleased to see IGCs fail. Not only are they a drain on insurer’s resources but they are capable of asking the awkward questions both bodies would rather not address.

It is – by contrast – very much in the interest of the public to make IGCs succeed, not least because the pension consultants are not getting paid to do the governance work for small employers. Without any kind of help, small employers with insured workplace pensions will have no point of contact going forward.

 

Employers are the key

It is too much to expect policyholders to pay attention to their pension by finding their IGC report, reading it and acting on it. People need help in this.

It is however a much easier thing for employers to engage, get educated and be empowered by these reports.

My suggestion to the Regulators is that it is through the auto-enrolment staging process, that IGC chair reports become known.

At the very least, the Pension Regulator could advertise the workplace pension products of Providers offering Qualifying Schemes by sign-posting the IGC Chair’s report.

I would like Government to go further and make it a requirement that the report be issued to every employer that is using a provider with an IGC (or indeed a GAA) for auto-enrolment so that employers can circulate this document to staff.

In time, I’d like to think that employers will actually want to circulate these reports in the workplace to demonstrate a basic level of engagement with the workplace pension they sponsor.


 

Doing something about it

This week  I am meeting with the DWP and the Pensions Minister to discuss how we can improve the standards of choice and ongoing DC pension governance in the workplace.

I want to do something about this and will be presenting these arguments at our meeting.

I very much hope that I will have the support of those who sit on the IGC Boards, those who advise on workplace pensions and those who are kind enough to read this blog.

 

TPR framework

 

 

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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