Is you trustee/IGC getting you value for money? (guest blog from Ralph Frank)



The concept of ‘value’ has been exercising Trustee Boards (“TBs”) and Independent Governance Committees (“IGCs”) for some time.  TBs are required to evaluate “the extent to which the charges and transaction costs represent good value for members”.  Similarly, IGCs are expected to “assess the ongoing value for money for relevant policyholders…… through assessing…….. the levels of charges borne by relevant policyholders”.  The Chairs of TBs and IGCs are required to feedback on these matters in their annual reports.  The first round of IGC annual reports, published in 2016, have generally been notable for the lack of clear assessments of value for money.  The corresponding TB documents are due to be published shortly.


There have been repeated calls from a number of IGCs for guidance from the Financial Conduct Authority as how to assess value for money.  The Pensions Regulator (“TPR”) has given helpful insights to TBs in its draft ‘guide to value for members’.  However, TPR undoes (in my opinion) some of this help by bringing peer group comparisons into play when it says that “your view could change if you discover that similar schemes pay less for the same service or that comparable services are available on the market to other schemes at a much lower cost”.  This statement is an invitation to inaction by prompting TBs to wait to see what their peers are doing.  First-mover disadvantage will likely influence the nature of the assessment published, undermining the process in its infancy.


Why should the assessment of value for money in defined contribution pension arrangements be much different from that in any other walk of life?  Perhaps a three step approach might be helpful in making such assessments:

  1. Identify and specify the services required;
  2. Get quotes for these services and choose relevant providers based on the specification previously defined; and
  3. Evaluate the service received against the specification.


The above steps recognise that each pension arrangement has specific requirements, even if many of these requirements are common across arrangements.  These different requirements will likely result in different costs being quoted by providers.  The selection criteria applied by respective IGCs and TBs might well differ too.  There is no ‘correct’ provider to choose.  However, IGCs and TBs can demonstrate that they have fulfilled their respective requirements by undertaking clearly defined selection processes.  The specification of the required services has further application in the ongoing evaluation of the services provided too.  If the services being delivered meet the required specifications within the budgeted cost, is value not being received?


The comparative element might follow this scheme-specific approach.  However, a key consideration when making a comparison is whether such testing is being undertaken on a like-for-like basis.  The less similar the services in question, the less valid the comparison.  A peer group approach might be helpful in assessing whether the services being contracted for cover the necessary bases or involve an element of over-elaboration.


Trustee Boards have a fiduciary duty to act in the interests of the members of the trusts under their control.  Independent Governance Committees are required to act solely in the interests of the relevant policyholders.  A fundamental tenet of these responsibilities is to ensure that savers’ funds are spent in a way that is commensurate with the benefit obtained.  Such a requirement seems not to be unreasonable or overly demanding.  Effectively, these guardians are being asked to spend others’ money as if it were their own.  Why then does there seem to be such difficulty in determining whether value has been obtained by those overseeing pension arrangements?

About henry tapper

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