Standard Life’s IGC Statement – two greens and a red!


The Standard Life IGC’s chair report was published on Friday. You can find it here

As a note to Standard Life, it would be good if this report could be given more prominence on your home page, you can access the report from a search on IGC but there is no clear path for policyholders and the report is a little hidden.

That said, both the short and long versions of the report make for interesting reading!

It’s not been a great year for Standard Life. The report touches on the poor performance of its GARS product, while this is not the sole component of the default used in its workplace savings plan, it has contributed to the serious underperformance of the default over the past year.

Perfromance FA

To January 1 2017 – source First Actuarial


Rene Poisson, the IGC Chair attributes this underperformance to BREXIT and low interest rate rises. We’d like to see a more strenuous investigation into what has gone wrong. It will take a long time for policyholders to make back over 10% under performance relative to Standard’s principal rivals. Long-standing policyholders and those who have aggregated from other schemes may not be satisfied by the Chair’s statement…


Frankly, if Standard Life were a football club it would have been relegated last year. If Celtic or Rangers had found themselves gong down this season, I doubt their fans would be quite this tolerant!

I have put the performance issue to the fore, in the reports it is buried. I would have preferred the Chair’s Statement to have given this major issue more prominent


The other major news item for policyholders this year came too late for the IGC Statement to do more than make reference.

The merger of Standard Life with Aberdeen Asset Management which is likely to happen in 2017 will complete the journey Standard Life has been on from insurer to fund manager. This is clearly a healthy transition for shareholders who will be operating in a less capital intense space with the potential for less risk and greater margins.

But we hope the IGC considers not just what is gained, but what is lost. There are aspects of the UK Life Insurance industry that have the potential to deliver great certainty to workplace pensions. I am not sure that the new structure will be able to focus on member’s interests quite as the old Standard Life could.

The IGC will be keeping a weather eye on developments. I hope that Rene Poisson (himself an alumni of JP Morgan) will consider what the move means to Standard Life’s commitment to the insurance against his member’s living too long.

Process and legacy – how effective has Standard Life’s IGC been?

I’ve included at the bottom of the blog a list of points we’ve picked out for discussion with Standard Life. The report goes into a lot of detail over minutiae which is extremely helpful for advisers and employer fiduciaries. With 20 pages of appendices and 40 pages of core text this is likely to be (as it was last year) the most comprehensive IGC statement.

For that reason I award the Statement a green for its effectiveness in getting to grips with the service levels, slippage against performance targets and its engagement with the legacy charges paid by longer-standing policyholders

Value for money

I cannot award a green for the Statement’s progress towards a value for money formulation. The Statement chooses to talk not of value for money, but of “value”, which is surprising, as Good for Go is an expensive workplace pension scheme both to member (0.75% +transaction charges) and to employer (£100pm maintenance fee). While there has been some discounting of the employer fee in 2016/17 it still makes Good to Go a premium product that needs to be considered as such. I didn’t get the impression that there had been much benchmarking of Standard Life’s costs and charges against market rivals.

What benchmarking that had been done, had been outsourced to NMG who had looked at Standard Life against 10 rivals and asked questions of 15,000 policyholders. I am a well-known opponent of relying on vox-pops of this kind. The framing of questions can lead to unintentional bias’ in answers and this is particularly the case where those questioned are not familiar with the workplace pensions they have been defaulted into.

My dissatisfaction with basing a value/value for money score on the views of those least capable of explaining their workplace pension is best summarised by the OFT in its 2014 report


The value of the research has been further undermined by what the Standard Life IGC points out is blatant interference by providers in the transparency of reporting




Reading the IGC Statement’s comments on the findings of the research (published in Appendix 8) , one can only conclude the exercise was a complete waste of time and money.


While there is a lot of time in the report devoted to investments, the substantive issue of what members are actually paying for their investments has not been addressed. This is not Standard Life’s faults or the IGCs. We await a definitive announcement on slippage from the FCA.

However, for ducking an exploration of the train-crash of 2016-17 fund performance, allowing itself to be led down NMG’s garden path and failing to establish a coherent benchmark for measuring long-term performance (as Pru and NEST has done), I give Standard Life’s report a red for value for money reporting. It could and should do better next year

Tone of the report

In last year’s report, I was critical of the IGC report as being somewhat in the pocket of the insurer. I am pleased to say that I’m not repeating that criticism. The very detailed examination of what is going on within Standard Life is helpful and interesting. The tone of the report is formal but it makes sense.

On many occasions it expresses frustration with Standard Life (as you would expect) and you sense that Rene Poisson is on the member’s side throughout.

Criticisms of the feeble attempts to benchmark Standard Life against its rivals, expose the truly awful problems with the default and present the reader with a list of potential worries about the merger with Aberdeen are dealt with elsewhere.

For all these inadequacies, this is one hell of a report which sets a benchmark for those to come, in terms of its attention to detail and professionalism of approach. I find its tone spot on and give it a green.

rene poisson

Rene Poisson -IGC Chair




Annexe –

A quick run through the key points we spotted in the report, that matter to those with, or analysing, Standard Life’s “Good to go” workplace pension

  • Although 98% of transactions are processed on a straight through basis on the same day, service levels for non-STP transactions (generally 10 days turnaround) slipped in 2016
  • This slippage has been, in part, attributed to the roll out of a new workflow management system (BPM)
  • Top complaints relate to time to answer phone, time to deal with demand and processing errors
  • IGC have challenged SL to extend telephone opening times. Trial period of extension will be undertaken
  • Cap on early exit charges was implemented on 15 February (ahead of 1 April 2017 deadline)
  • Policyholders paying greater than 1% has reduced from +250k to -50k (99% of which due to ‘expensive’ fund choice rather than commission)
  • IGC have challenged SLI on poor investment performance over 2016 (attributed to Brexit and lack of interest rate rises)
  • Modern QWPS provide no more profit than legacy schemes and both provide value for money
  • There are legal issues with switching member investment strategies in legacy schemes (away from annuity purchase). IGC is disappointed that there hasn’t been legislation to address this issue. SL are considering:
    • Contacting employers/advisors with ‘inappropriate’ defaults
    • Redesigning the Annuity Purchase Fund to be more multi-asset in nature and therefore more appropriate at retirement (an alternative Annuity fund would be introduced for switching to for those truly purchasing an annuity)
    • Changing scheme rules to allow SL to make changes to defaults
  • Process flaw resulted in 0.75% charge cap being breached for a number of members. All are being redressed
  • SL trialled a ‘save more tomorrow’ initiative with a number of large employers. Take up was less than 5%
  • SL have put aside £175m in relation to historic annuity sales pending an industrywide FCA review
  • IGC believe a single investment only offering as a default does not provide value for money ,
  • IGC believes core financial transactions are generally processed promptly and accurately
  • As there is no agreed basis for reporting transaction costs (expected in Q2 2017 from FCA), it has been very difficult to assess these fully


About henry tapper

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