I’m pleased that after a really poor first IGC report, the Hargreaves Lansdown IGC have taken producing their 2017 report, more seriously.
A smooth operator
If there was such a thing as a premium workplace pension, the Hargreaves Lansdown (HL) Corporate Vantage product would be it. It’s top on price and its top for engagement. HL customers (of whom there are 75,000 with over £2bn under management) are very engaged – a whopping 1600 of them responded to the IGC’s recent survey on value for money and nearly 60% are registered to use the Hargreaves Lansdown website to view and manager their pension.
Less than three quarters of those using Corporate Vantage use the default fund, again showing what an independently minded bunch their customers are. Having spent a summer at the organisation, I know a little about the culture which reminds me of (the best bits) of the Equitable Life culture. In terms of controls, quality of communications and ease of use (to members) Hargreaves Lansdown is a standard setter.
I was slightly disappointed that the report paid less attention to the employers who have chosen Corporate Vantage and are responsible for passing contributions (under auto-enrolment) to the SIPP. Managing and improving the employer interfaces is part of HL’s value proposition; an inefficient interface causes expense to an employer and this can only be passed on to members in a negative way (education and contributions). It would be good to see HL adding this to the “to do” list for 2017-18.
But in terms of demonstrating effective governance, the IGC report does a good job and I give it a green.
A peculiar perspective on value for money.
The IGC approached the managers of the active and passive defaults (Schroder and Black Rock respectively) for information on the costs of managing their respective funds.
Either no numbers were received or they have been with held, but we are reassured that
“both managers have emphasised their commitment to minimising transaction cost , they being a drag on performance”.
This is an alternative way of looking at hidden costs which are often used to subsidise other parts of the business. I am not particularly comfortable with the presentation of the Corporate Vantage charging structure
Reading this, I was totally confused by what the Hargreaves Lansdown discount had to do with the price of fish. I was further confused by the inference that there were no charges to pay on cash (when clearly a clip was being taken from interest).
The report criticises HL for not being clear, but I found the IGCs own reporting little better. I will be interested to find out how much Schroder’s active transaction costs take the total fee paid by members using it as the default over the 0.75% charge cap. With a sceptical hat on, I suspect that the number may not have been published for that reason!
Overall, I thought the IGC did a pretty poor job of investigating (or at least demonstrating its investigation) into value for money. I am still confused where the total fees are going and I have no performance data within the report to make up my mind where value is being achieved. I am giving the report a red for value for money as either the IGC are being credulous or they are hiding something.
Interestingly, the report focusses on the response of the survey of members and comments that around two-thirds are very happy with HL, the rest were unable to say whether Corporate Vantage was good or bad.
A lack of perspective
When it comes to the tone of the report, I consider it a little insular, by which I mean it talks to HL’s customers as a breed apart. But the majority of the 75,000 members of Corporate Vantage aren’t there because they chose to be but because they work for an employer who chose the plan. While employers (in Pension Playpen’s experience) chose Vantage to be suitable for their workforce, that doesn’t mean all members are as financially savvy as those making those choices.
The report would do well to talk of Corporate Vantage within the context of other workplace pensions and understand the high numbers of don’t knows as people who have little experience of workplace pension alternatives.
In short, these people may well be asking the IGC to speak to them of Corporate Vantage relative to external benchmarks and not as an “island unto itself”.
This is a minor criticism in terms of tone and perhaps another reason I feel the report is weak on the value for money question. Never the less , it marks down what is otherwise a well written report from a green to an orange.
One final thing, the stock photos and the heavy blue front page do make this report look only too corporate. Perhaps in future editions , the presentation of the material can be a little more member-friendly.
the report can be linked to from this page. http://www.hl.co.uk/company-pensions/igc