Workplace pensions – what really matters.


For the past few years I have provided data and qualitative judgement to NMG, a company that researches insurance companies and the service they provide intermediaries. The information NMG has asked of me has been about my perception of those insurers providing workplace pensions.

Yesterday, for the first time I was able to meet other contributors to this survey; I knew many of the contributors and the companies they worked for.All had advisory hats on and some of the advisers were also providers of workplace pensions.

It turns out that the answer to the question “workplace pensions- what really matters?” depends on who you ask. NMG split their respondents into three, IFAs, Corporate IFAs (CIFAs) and Employee benefit consultants (EBCs). I think we were classed as EBCs.

The data we were shown was longitudinal (changing over time) and lateral (changing with the source). Over time, the value of an insurer has changed from its capacity to pay intermediaries large amounts of money , to its being able to support the intermediary in other ways.

Royal London are generally considered to be the most supportive workplace pension provider because they provide IFAs and CIFAs with most support around implementation. Legal & General on the other hand offer best value for money but little support while Standard Life have gone from being supportive to predatory as they compete for the relationship with the employer and employee previously enjoyed by the intermediary.

The general reader may be puzzled by this assessment of the market. Discussions around the major master trusts, NOW, People’s and particularly NEST was very limited. They were mentioned as comparators but not as competitors.

When I raised the question as to who was recommending NEST, there was some surprise. NEST will set up more workplace pensions this year than the entire insurance sector and is set to dominate the market in 2017 to a point that traditional workplace providers could  be marginalised.

The simple facts that most accountants will now provide a recommendation to employers (generally to use NEST) and that most IFAs , CIFAs and EBCs regard the auto-enrolment market as of secondary importance suggests that whatever is happening right now, is not being monitored by NMG.

The general reader may also be puzzled as to why this assessment of the providers , focussed on the relationship between the provider and the intermediary and not the outcomes of the workplace pensions themselves.

I brought up the elephant in the room, the actual returns delivered by workplace pension providers to those investing in their products (the beneficiaries – AKA consumers -AKA us). Though this table is flawed, it is the only comparative table of investment returns from the group under discussion yesterday (Source defaqto/NEST – default investment funds)


I say (flawed) as the NEST numbers appear to be partial (the initial phase of the growth stage of their TDFs being ignored). They are also flawed as these numbers are declared net of fees from the underlying contracts (which are dispersed over a range of at least 0.5%).

What ordinary people judge a workplace pension by , is not the amount of support the provider gives to the intermediary but the outcomes of the workplace pension to them.

I was really surprised that the wide dispersal of outcomes between top and bottom performing providers was not a matter of interest to those in the room – including the hosts.

I am more than puzzled, in fact I am disturbed that the Independent Governance Committees have commissioned NMG to provide them with the metrics, methodology and data for analysing the value part of the value for money equation that they will be publishing in their Chair Statements in April 2017.

If the analysis of providers is based on soft factors, such as those discussed yesterday, then the analysis would be meaningless. The focus of IGCs must always be on the outcomes to members. My understanding , from yesterday’s conversation, is that the research NMG are doing is into what members regard as important from a pension provider.

Apparently those interviewed have been put into focus groups and required to spend some time answering detailed questions about what features of a workplace pension matter to them. This strikes me as un-natural and slightly bizarre. I can happily spend a couple of hours discussing which features of my smart phone matter, or how Yeovil are turning their season around, but I would struggle to hold a conversation about what I value about my L&G workplace pension – other than it seems to have increased by 15% over the past 12 months.

What really matters

What really matters to me is that the person managing my money is acting for me and my interests. What matters to me as a consultant is that that person is doing it for all L&G members and what matters to me as someone trying to restore confidence in pensions is that L&G are part of a wider movement to improve the standards of stewardship of the investment industry as a whole.

These are the proper interests of an IGC and I regard any diversion into soft values as a distraction from the main event. Yes I am pleased when a provider offers an excellent link to payroll and reduces the cost of the workplace pension to the provider. I am pleased when an insurer makes the implementation and management of a workplace pension easy and profitable to an IFA.

But what really matters is the amount of money in the pot.  If I was Standard Life and (to a lesser degree Royal London) and I would be very concerned about what happened to those in the default investment option of my workplace pension this year. If I was Philip Green or Rene Poisson of Royal London and Standard Life, I would be very concerned to understand what went wrong! Even if I was the soon to be announced permanent chair of L&G’s IGC, I would be worried at just how out of kilter the returns in 2015-16 had been (just what kind of risks were taken).



Trivialising other people’s pensions

I left the meeting with NMG and the other consultants frustrated and saddened. It seems that we are still a long way from choosing workplace pensions on their merits to the people for whom they are purchased.

The decision making typically being made by employers is based on recommendations from accountants and is incomplete. There is no proper analysis of the investment propositions of the various providers freely available in the market (the NEST/defaqto paper is the closest we currently have).

To suppose that the value people see in workplace pensions is any way aligned to the values discussed in the room yesterday would be ludicrous. IFAs , CIFAs and EBCs work to slightly different agendas but they are all self-serving.

To suppose that accountants know best is just as disturbing, the majority don’t know anything at all and their herding of their customers into their favoured master trusts a disgrace.

We are dependent on the IGCs and the master trust chairs to hold the providers to account. These super-fiduciaries are supposed to be acting for us – the members. But if they are relying on the trivialisation of pensions that I saw yesterday, then I am very worried indeed.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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5 Responses to Workplace pensions – what really matters.

  1. Mike Lacey says:

    I would have liked to have been there. I’ve used many of the providers that seem to be on the periphery, for good reason.

    I question the validity of showing figures for the Royal London default fund – it is a sophisticated lifestyle process and in the last 15 years, the asset allocation changes 180 times as funds are switched from more growth-oriented, to more cautious funds. This probably explains why nothing is shown for NOW – they use (one) lifestyling route.

  2. henry tapper says:

    I am told that NOW were reluctant to supply numbers through a NEST sponsored publication, your points are well made Mike, we urgently needed a standardised means of comparing defaults that doesn’t just focus on growth.

  3. I agree Henry. I have always been puzzled by how this market is supposed to work theoretically, since the purchasers of the product have no interest in the outcome. What is the underlying theory of competition? I’ve asked many people this question and never received an answer that made sense to me.

  4. Kevin Froggatt says:

    Dear Henry, I am an IFA and Director of a very small firm. I find your comment that all IFAs are ‘self-serving’ extremely disappointing. Whether I am providing advice to a private individual, employer, or member of a group pension, my focus is ALWAYS to provide the best possible outcome for the person building their retirement fund. I admit that unfortunately there are advisers with little regard for the scheme members retirement needs. However, please do not tar us all with the same grubby brush as this ultimately breeds distrust of ALL advisers and inevitably leads to the people who really need life changing advice being put off making contact. We need to work together to ensure members build effect pension funds and our industry weeds out the corporate profiteers.

  5. henry tapper says:

    I think the Self-serving comment referred not just to IFAs but to all intermediaries. Relative to true independence, which is a fiduciary obligation on IGCs and Trustees, the commercial intermediary must be treated to some extent as biased. I say this as an intermediary of 33 years standing and do not exclude myself from the observation!

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