Help of the helpless – the destitute world of the GAA



The words of the song are apt for the Governance Advisory Arrangements I have read. With the exception of that of Mobius they are either elegies for what might have been or a convenient way of getting round a regulatory encumbrance.

There can be  few testaments to the state of change in workplace pensions over the past 25 years than our Directory of IGCs and GAAs (Governance Advisory Arrangements). Until the FCA publishes the full list, I have only Google and friendly emails tipping me off to the insurers who have produced one. But taken on their own, the GAA reports I have read are a tombstone to the failed attempts of many insurers to insure us against the financial consequences of old age.

There is a group of pension providers who have no representation on the IGC/GAA directory. There are some mighty names of the past such as Sun Life of Canada (incorporating Confederation Life, Laurentian (Trident Life) who seem to have no IGC or GAA at all.If you have a company sponsored workplace pension with SLOC then the #pensionrevolution will have passed you by; this from its website.

We believe that in the light of the small number of schemes we have it would not be cost effective to make them qualifying or to be able to use them for auto-enrolment

The noble aim that “no one gets left behind” has to draw the line here.

St James Place – above independent governance?

There are some insurers who consider the idea of independent governance of pension arrangements not worthy of its attention

While the owners of Deutsche Bank granted Abbey Life policyholders the benefit of a full IGC, St James Place – a FTSE 100 company with £58.6bn of client funds under management- couldn’t be bothered.

Instead they have plugged into the largest of the Governance Advisory Arrangements (run by Pitmans) who have produced a tailored Chair’s statement that is compliant but no more.

It’s section on Value for Money concludes

As the fees reflect that it is a high quality and all-encompassing service proposition covering a distinctive approach to investment management and guaranteed financial advice, the GAA is not in a position to offer an opinion on the overall value for money for members

The Chair, Colin Richardson signs off the next steps  with the grim warning,

The process of annual reports under the FCA requirements is ongoing and further annual reports will be required.

This from a FTSE 100 company with £58.6bn of client funds under management! I’ve been dismissive of Hargreaves Lansdown (SJP’s principal rival) but at least they went to some effort, if I was an SJP policyholder I would expect more than this.

Other Pitmans GAAs

While SJP dwarfs the other participants in the Pitmans GAA, we understand that it is only one of thirteen insurers plugged in. To date we have reportsor promises of reports for these others

Wesleyan Assurance

Gaurdian Assurance (next year to merge into the ReAssure IGC)

Equitable Life

Curtis Banks

NFU mutual (dodgy link)

Big Blue (Aon) You have to give Aon your details to get the report.

Wesleyan Assurance – not the most rigorous of work

The analysis of value for money focusses on the headline AMC and concludes

Where the annual management charge (AMC) is 0.75%, the workplace personal pensions represent reasonable to good value for money.

Where the annual management charge (AMC) is 0.9% or 1.0%, the workplace personal pensions represent reasonable value for money.

Without labouring the point, this is not rigorous work.


Gaurdian Assurance – here today/gone tomorrow

As with the Friends Life IGC, the Guardian report is “say hello, say goodbye”.Next year Guardian policyholders will come under the auspices of the ReAssure IGC so this will be the one and only report. Policyholders will be spared further analysis of this kind

Where members are no longer contributing in our opinion the GPPs represent reasonable value for money, taking into account the benefits offered to members.

The value for money is reduced slightly but remains reasonable for the vast majority of members who are still contributing and incurring Monthly Service Charges in addition to the AMC The impact of the Monthly Service Charges, when expressed as a percentage reduction in yield, increases for members with smaller funds.

The rather perverse message seems to be “stop saving into your Guardian personal pension and you’ll get better value for money.


NFU Mutual

The NFU report can be accessed from a link on this page. The link has proved a little temperamental and perhaps NFU Mutual could look at re-hosting it.

NFU Mutual continue to offer its workplace pension savings plan for employers wanting an auto-enrolment QWPS.

This leads to a slightly more strenuous analysis of the charging structures available to policyholders but for a report that sets out to be on the member’s side, its conclusions on value for money are hardly member friendly.

The value for money is reduced but remains reasonable to good for the small number of members who still have capital units for which there is a higher effective charge on just that part of their investment fund.  However, these capital units were predominantly created before April 2015.  As of November 2015, no members are still purchasing capital units.  Therefore, such higher charges were almost entirely already within policy values prior to the establishment of the remit of the GAA. 

The value for money is also reduced but remains reasonable to good for members who are still paying contributions, due to the allocation rates of less than 100% (which act as a charge for contributions). The impact of this charge varies by age but is higher for members closer to expected retirement age.

In our opinion, the AMC of 1.0% for GSPs represents reasonable to good value for money, taking into account the benefits offered to members.

In our opinion, the reduced AMC of 0.75% for Qualifying GSPs represents reasonable to good value for money, taking into account the benefits offered to members, and we note that all employers currently have the option to make their scheme qualifying when their staging date arrives.  Furthermore, we note that NFU Mutual will be arranging for all its GSP schemes to move to a 0.75% AMC in 2016 and that lower charges are available to those with larger funds.

Equitable Life

Pitmans assessment of the Equitable Life’s  value for money to policyholders is simple

The GAA’s opinion on the value for money delivered is that following the changes proposed by Equitable Life in response to the Independent Project Board (IPB) the GPPs are reasonable to good value for money.

But the analysis suggests that what is going on within the Equitable is extremely complicated.

And there is evidence throughout of the still attitional relationship between the Equitable and its disgruntled policyholders.

As with all features, further development of investment options would have an associated cost which would have to be borne by the mutual society members and therefore incurring such costs is not necessarily in the members’ best interests.

This statement suggests that whatever the relationship between  Parliament and other external auditors – and the Society, Governance is anything but simple

Additional governance structures for the benefit of members that are specific to Equitable Life include the with-profits committee for members invested in the with-profits fund, as well as the considerable external scrutiny of some aspects of the running of Equitable Life by Parliament amongst others.

and then there is the complex relationship with Equitable’s owners Lloyds Bank

Following the recapture of the unit-linked business from Lloyds Banking Group in 2015, Equitable Life decided to review the pricing for unit-linked policies, as these are being subsidised by with-profits policyholders.

I got the impression that Colin Richardson was very happy, after spending time in the war-zone to escape the bunker unscathed. The IGC tells us very little about value for money but a lot about the Governance mess Equitable continues to be in.

Curtis Banks

I have to admit to knowing nothing about Curtis Banks before reading the Pitmans GAA report (another from the pen of Colin Richardson). It follows the template of all the other Pitman reports and having been through it , I still know nothing about Curtis Banks other than it administers SIPPs and has its logo on each pageof the report. The only two statements that are remotely of interest commence  and end the Chair’s Statement. The statement starts

The GAA’s opinion is that, in the context of protecting members of workplace pension schemes, the aspects of the SIPPs provided or controlled by Curtis Banks Represent a small part of the value proposition and, therefore, we are unable to offer an opinion on overall value for money for members. For the elements controlled by Curtis Banks, the GAA’s opinion is that reasonable value for money is provided.

and ends

For the GAA to be able to evaluate the whole value chain would require knowing that

 ,members are all receiving advice

 , investment strategies implemented are appropriate for each member

 , investment strategies are monitored and changed where required

 the net of fees results of these strategies are beneficial for members. This information currently resides with the IFAs and would be difficult to collect because it relates to a range of IFAs.

In the absence of co-operation from IFAS, one really wonders whether it is worth this GAA continuing.

Aon Big Blue

To get to this report you have to hand in your details on a data capture to Aon, this is not a good start, the GAA is supposed to be a public document and not a means for Aon to improve its marketing database.

The GAA Chair Statement was published in December 2015 (some three months earlier than any other report). Aon have issued a press release using the GAA to promote the product and it’s not hard to see why

The GAA’s opinion is that, in that context, both Bigblue Touch and Bigblue Touch 4life will represent good value for money for members.

This is the highest categorisation adopted by the GAA within an overall potential range of good value to poor value.

This good value for money will vary slightly between employers because of the variable pricing structure which will depend on the characteristics of each individual employer’s scheme.

Even for the schemes at the upper end of the charging structure there will still be good value for money under our assessment.

This assessment is based on the high quality of the benefits offered to members, balanced against reasonably low charges: in particular the good value and low charges for the default strategy pre retirement.

I am sure this is true, but is this really what a Governance document should be about? There are many questions I would want to ask Aon about this product to ensure that members really do know what they are paying for, are aware of the relationship between Aon as advisor, Aon as product provider and of the potential conflicts resulting from Aon being “vertically integrated” throughout the product.

For the GAA to have value, it needs to be more than an endorsement of Aon’s approach to DC , it really needs to kick the tyres and this report didn’t even check the tread.

Other Pitman GAAs.

We understand that there are a further six GAA reports from Pitmans and I will list them when I find them, reporting on them when I have another block of time.

Taken as a whole they are – as you would expect – lacking the diversity of the IGCs which were not written on a template. These reports are not very vigorous and relative to the PAN approach they can best be referred to as GAA-lite (as Pitmans advertise them).

The Aon Big Blue is a little more detailed and may be the GAA-heavy variant, but I get the impression that firms are generally using Pitmans to get a compliance headache out of the way rather than to provide members with a useful service.

More can be done in 2016, even within the terms of reference that Pitmans have given the GAA.

Mobius Life – a very good GAA.

The Mobius Life GAA (MLGAA) is produced by Pan Governance . It is chaired by Andrew Cheeseman and its Chair’s Statement is a much more robust affair than the Pitman statements.

There has been an attempt to assess value for money using PAN’s own methodology and the results of the balanced scorecard employed are published in the report.

The overall rating assessed by the MLGAA for the year ending March 2016 was 69% made up of 17/25 in respect of Quality, 21/35 in respect of Risk, 6/10 in respect of Relevance and 25/30 in respect of Cost.

This is a lot more than “going through the motions”, this is sticking heads above parapets and challenging stuff. As I have been involved in the products subject to these assessments and previously been a policyholder I feel I can relate to these scores.

Though how the ratings are benchmarked isn’t published, giving the Investment Solutions products a 7/10 rating seems about right.

At one stage Mobius Life was Schroders Life and the bulk of the legacy arrangements that Mobius look after were set up through expensive consultations with Mercer, Towers Watson and other major consultancies.

Policyholders are therefore used to a high quality of governance and it’s good to see that Mobius has made the effort to establish an effective GAA which has produced a readable report and added to the general understanding of how we can measure Value for Money.

AJ Bell –

AJ Bell’s GAA is produced by Punter Southall’s Independent Trustee arm (PSITL) and its chair is Simon Riviere.

This is a comprehensive piece of work which should be looked at by the Chair of all SIPP GAAs and indeed by the IGC Chairs of Hargreaves Lansdown, Intelligent Money and True Potential.

The report stops short of commenting on relative value for money but it makes a very telling juxtaposition of the charging structures of two workplace pensions administered on the AJ Bell Sipp platform.

Screen Shot 2016-04-17 at 10.40.10

Just how the Premier Multi-Asset Monthly Income Fund can justify charges that appear to be a multiple of those charged by Vanguard is a question I hope PSITL will address next year.

In conclusion

The scope of the GAA’s is limited, we should not expect the in-depth analysis from them that we’d expect from IGCs nor the strenuous negotiations over legacy, nor the thought leadership on value for money.

It would be nice to see reference to Stewardship, I note one or two of the insurers under scrutiny (such an NFU Mutual) have signed up to the Stewardship code. But I am not as worried about this with GAAs as with IGCs.

The best GAA reports, those of Mobius and AJ Bell are clearly there to help, the Pitmans reports are not so helpful but have the capacity to be so. One or two reports are weak, especially the St James Place report which (for an organisation of its size) is poor.

I am not sure that overall the GAAs are adding enough at present and in one or two cases, I see little point for them continuing, but overall, they contribute to the sum of DC Governance and – if encouraged – promoted and distributed, they will become valuable in time.

When other helpers fail and comforts flee,
Help of the helpless, oh, abide with me.

Appendix; The GAA Directory as it stands

or these arrangements is sparse, so far I only know of those listed below (PTL unless otherwise stated) . I may review these if time permits.  If you know of or have published a GAA statement not on this list, please send it to me (see details below)

Mobius Life                                 Pan

Wesleyan Assurance                Pitmans

St James Place                            Pitmans

Gaurdian Assurance (to be ReAssure IGC) Pitmans

 Equitable Life                            Pitmans

Curtis Banks                               Pitmans

NFU mutual                                Pitmans

Big Blue (Aon)                            Pitmans

AJ Bell                                          (Punter Southall ITL) 

We understand there are a further 6 Pitmans reports to follow

About henry tapper

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