Not drinking the Kool-Aid – The Virgin Money Stakeholder IGC

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Remember Stakeholder Pensions? Virgin Money do!

In fact Virgin were one of the great enthusiasts for Stakeholder Pensions, sadly their ambitions were never quite realised commercially but it’s good to see that Virgin continue to treat their Stakeholders fairly and their IGC report is excellent.

The report, or written by Sir David Chapman is mercifully free of stock photos or gimmicky info graphics. It does what it says it will do, give policyholder a no-nonsense estimate of what they are getting relative to what the Committee think they should be getting.

It concludes that Virgin aren’t giving members enough investment management and leaves policyholders in no doubt that unless a satisfactory review is carried out and actions to improve the default taken, this will be escalated.

It concludes that performance of the investments is “inconsistent” with that of other funds and calls for Virgin to provide better benchmarking for members so they can see how they are doing. This is a similar approach to the Prudential’s which sets an internal performance benchmark (3% +CPI- after charges have been taken) as the measure for value for money.

It thinks the lifestyle approach based around “income protection” is misleading. If the graph below is what the IGC are referring, I can see why

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Pension freedom?

 

Where the means to address the performance issues of the investment managers and provider’s charges is limited, then the capacity to judge VFM by results is a sensible way of going about things. This appears to be the approach that Virgin’s IGC are taking to VFM and it seems sensible to me.

It concludes that the functionality for processing transactions is fit for purpose but it looks as if the IGC’s actions have triggered work within Virgin Money to improve internal controls. This is an example of the report’s straightforward honesty, Virgin are given a green for administration but it’s clear the IGC is on the case to ensure member’s interests are protected.

The assessment of the money policyholders are paying for a passive investment strategy, the IGC is blunt

The AMC would appear to be higher than comparable passive schemes. The limited availability of suitable benchmarks is a challenge, and the IGC is monitoring industry developments in this area.

Virgin only gets a green on the IGCs scorecard for administration , it gets a red for its default management and an amber for everything else.

The Virgin “specials” which give policyholders access to various Virgin treats such as access to lounges, prize draws and the like are drily noted as being unique to Virgin, if this sounds a little curmudgeonly, the report does acknowledge that take up of these benefits is “high”. I don’t get the impression that Sir David Chapman has drunk the Branson Kool- Aid. Perhaps the time at Northern Rock Asset Management (now owned by Virgin) taught him that substance is more important than style!

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Branson at Northern Rock

 

This may come as a wake up call to Virgin , it will certainly surprise policyholders. The issue is whether policyholders will be frightened or heartened by this no-nonsense approach.

I decided to show the report to a couple of friends last night without them knowing it had anything to do with Virgin, neither of my friends knows anything about pensions but they both said that whoever had written the report was clearly on the customer’s side.

This is as good a mark of success as I can give an IGC report.

In terms of tone and layout, this is an extremely good report, the tone is clinical but the language is neither patronising nor over technical. Clearly it was written to be read and I give the tone a green.

There is much in the report that goes unsaid, but partly because of the authority of the tone, but mainly because of the precision of the judgements, I am happy that I don’t have the detail of the work the IGC has done and prepared to give the report a green for the effectiveness of the IGCs work.

The value for money framework is not ambitious, there’s no attempt to look behind the curtain to see what work is being done by the fund manager (s) to improve performance in terms of cost reduction or in exercising good governance over the underlying assets. I see scope for this next year, and reading the CVs of the independent members of the Committee, I hope they will ask questions of the Virgin Money Asset Manager (s).

But for the clear scorecard, the draconian scoring and the lack of moaning about lack of support from the FCA, I give the Virgin money a green for value for money.

Next steps

Virgin has been around for some time, the original policyholders set up pensions nearly 20 years ago and many will now be maturing. The IGC might look next year at the options Virgin are giving members to spend their pots. I hope that next year’s report will look at this area of the service in more detail.

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Virgin stock photo (not included in the report)

 

Thanks to Nils Johnson for finding us this report.

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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