Aviva’s IGC report – a great leap forward

great leap forward

Aviva has quietly become the most important insurance company operating in the workplace pension market. While others have pulled in their horns, Aviva has remained committed to auto-enrolment and now features in every search we conduct for new pension providers.

This is an extraordinary turnaround from earlier in the staging process and this is reflected in the 2017 Aviva (and FriendsLife) IGC Chair report.

As with the life company, so with the IGC – 2017 has seen a step up to the plate and this report is of the highest quality in tone, in demonstrating the effectiveness of the IGC over the year and in the steps it has taken to show us how we are getting value for money.

The Chair, Inder Dhingra, didn’t get high marks from me last year. This year I can happily commend him and his report which I like very much.


At the heart of the report is the IGC’s Vfm assessment. 80% of its policyholders are in the new green product and 20% in the older amber legacy product

Aviva IGC17

The report does not shy away from confrontation and there is clearly some dispute with the life company on the legacy costs being incurred by the longer serving policyholders.

Aviva 2

I know Dhingra a little and this is his tone, quiet but effective.  Aviva is a behemoth that brings together many well known pension brands in its legacy, inevitably the process of harmonising charging structures to be fair to all policyholders is not going to be easy and there is no greater challenge than Aviva’s.

There is a conflict between the policyholder (member) and the shareholder with regards commission. The cost of commission was supposed to meet advice, but that advice is rarely being provided. The moral argument is clear, the policyholder entered into a bargain to which Aviva were the senior party and though the advisers have failed to deliver, Aviva must now stop charging policyholders for an undelivered service.

Aviva still rely on advisers, the report is sensitive to this, but the report is making it clear where the IGC stands on the issue. Both in tone and in its impact, the report is hitting the mark.


A more comprehensive investment report

I was impressed to see performance charts (for both nominal and risk-adjusted performance) in the report. We could do with clearer explanations of DAF1,2 and 3 and an explanation of where the money goes, but at least we have an IGC that is prepared to show us how the funds have performed against the benchmarks set them. This is a good start – next year’s reporting can build on this.

I was also pleased to see the IGC not shying away from reporting on transaction charges. I’m not sure we can pay too much attention to the actual numbers as they use an internal measurement system that doesn’t conform with the FCA’s proposals for slippage (FX costs for instance are omitted). Nonetheless , the publication of fund specific transaction costs for the principal Aviva and Friends Life funds is  helpful.

Aviva 3

For advisers such as ourselves, this information enables us to talk meaningfully to employers about the cost controls within the investment product. L&G and Aviva have both decided to publish and this gives hope to those of us working for transparency that others will follow.

I do not think the transaction charges are complete, nor do I think the performance reporting complete, but the direction of travel is clear and let’s hope by this time next year we can see more consistent and complete reporting on both value and money.


 

How we want our money invested.

I was very pleased to see the IGC publishing the Adviser Barometers findings.aviva 4

It is a shame that out of 15,000 surveys sent out, only 400 were returned (especially when the advisers are supposed to be helping exercise governance!). But let that be,

The IGC is clearly taking an interest in what Aviva is up to in areas Environmental and Social Governance and though this remains a drip, it can become a trickle and then a torrent. Aviva have been at the forefront here for some time and I look forward to them battling with LGIM, SLIM and others to keep up the momentum.

I will be publishing a separate league table showing how ESG friendly the IGC reports are, at present Aviva sits at the top!


How we determine value

Aviva participated in the NMG policy holder survey and the Chair is typically polite in his response to its findings.

But the report has insights on the vox-pop which have rather more intellectual weight than the triumphalist cries of “charges don’t matter” that greeted the original publication of the NMG findings.

Aviva 6


In short

Aviva are now the major insurer available for ongoing workplace savings , their GPP is operating well and is generally available to all employers staging auto-enrolment.

Few would have predicted this! After last year’s lame effort, I am really happy to see the Aviva IGC coming up with a corker of a report which matches the transformation of he life company.

The tone is serious, if perhaps a little dry; nevertheless it gets the messages across and I give it a green for its delivery!

The report is effective and shows the IGC to be effective in championing the member’s rights. It is a huge legacy and a massive task for the IGC, I give the IGC’s report a green for effectiveness.

I don’t think that Aviva have got as far as L&G in its disclosures and I question some of the calculations in the investment section of the report, but the IGC is looking at value for money in new ways (the ESG section is good) and there is a progressive feel about the report’s intent. I was minded to give the report an amber but eventually gave it a green for value for money.

It would be wrong to interpret my giving  this report three greens as me giving it an all clear. The IGCs operate in an penumbra of obfuscation and though the smoke is clearing, we have a long way to go till we can see clearly! But Aviva are getting there – thanks!

aviva


A copy of the report can be found via the Friends Life website and will no doubt be searchable on Aviva’s site shortly. I have a PDF – drop me a line if you would like me to share (henry.tapper@pensionplaypen.com)

https://www.friendslife.co.uk/independent-governance-committee/

 

 

 

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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