Radical thoughts about “value for money” – from Julius Pursaill (aka mystery blogger)

mystery blog


Establishing a consensus on what “value for money” is, is proving too hard for the IGCs and Trustees, we need intervention from a “deus ex machina” (aka the FCA). Once we know the means to measure, I believe the market has the capacity to deliver simple value for money scores which can be benchmarked using the equivalent of football league tables.  If we cannot offer people value for money in terms of points scored, we will have failed.



Newsflash – the mystery blogger has come forward. It is Julius Pursaill. He is happy to be credited and I am happy to credit him. If you want more on Julius, I’ve linked his linked in profile at the blog’s end.

value for money

There is rightly increasing focus on value for money (vfm) in DC schemes, referenced crucially in the annual statements from both IGC and Trustee Chairs.

Vfm in DC pensions may seem a simple concept – but there is no established consensus around a definition and we are already seeing some widely differing views emerging around wherein value actually lies.

Standard Life Investments, for example, has borrowed from the National Audit Office definition of vfm to argue that consistency of outcome between different cohorts of customers is a key component of value. This neatly underpins the use of diversified growth funds in the accumulation phase.

Elsewhere, as required by the Pension Regulator, there has been a developing focus on collating and evaluating below the line transaction costs.

In an attempt to build consensus around a member centric notion of vfm, IGCs have recently completed, with the help of Sackers, some value for money member research.

There are lots of relevant and important insights contained therein, and it may seem reasonable to move from feedback on “what members value” to evaluations of “value for money” on behalf of members. But it would be dangerous to assume these are the same thing.

Two examples illustrate why we should be cautious about moving directly from one to the other.

The research revealed that charges, in isolation, aren’t important to members. I have already heard it argued that, consequently, pressing providers further on transaction costs should not be a priority. In a world of lower expected returns, I find it impossible not to conclude that charges will have a crucial impact on member outcomes and that therefore they must remain a key component of vfm, whether or not members agree. In fact, a closer reading of the survey makes it clear that returns are a crucial vfm component for members, so charges, as a key contributor to outcomes, must remain at the forefront of our focus.

The survey also provides ample evidence for those who wish to argue that (sometimes costly) multi channel communication strategies are a key component of vfm from the member perspective.

Again, we should be cautious. At the RBS DC scheme, where I am a Trustee, we have a clearly expressed view that engagement should NOT be a necessary condition for good member outcomes.

It’s linked to a further belief, that not all member engagement leads to improved member outcomes.

I have heard it argued that we should be encouraging members to understand the range of investment choices available and measure the success of this strategy by reference to member numbers opting out of the default. The level of investment sophistication required to build a sensible alternative strategic asset allocation (SAA) outside the default will be beyond most members. In a recent member nominated trustee appointment exercise (where we were by definition dealing with more engaged members) of those who had opted out of the default (a significant proportion) there was just one single sensible and appropriate (based on the members’ own explanations) alternative SAA and that was from a qualified actuary…….

I have experience of member communications intended to increase contribution rates leading to as many members reducing as increasing.

It’s also arguable that existing communication offerings are typically of most benefit to those who are most financially sophisticated (and already somewhat engaged) – and there is therefore a risk that the costs associated with them represent a cross subsidy from the typically less well off members to the more well off – not entirely satisfactory from a governance perspective.


Providers, who have often invested very significant sums in their communication programs, in part to differentiate their value proposition, will want to argue that these are a key component of their value proposition and therefore of vfm.


Before I get accused of wanting to keep members in the dark, like mushrooms, I should make it clear that I do believe it is possible for engagement strategies (and associated costs) to represent vfm. But for me, that value must be rooted firmly in what makes a difference to member outcomes. In order to asses vfm, I would want to ask “what behavioural changes can be evidenced as a result of member engagement?” Some good answers might be: increased contribution rates, active selection of derisking strategies and active engagement with the timing of benefit vesting. But I have seen very little evidence so far that costly coms strategies can be linked to positive changes in member behaviour. There is some emerging evidence, but we need more. We should be cautious of accepting coms costs representing a core component of vfm where there is no evidence of positive impact on member behaviour and outcomes.

We should at the same time maintain our governance focus on costs and we should be spending more time thinking about how we make value for money assessments about different strategic asset allocations, with higher and lower levels of risk asset exposure, about volatility – is it important or not important? And going back to Standard Life’s argument, how important in terms of vfm is dispersion of outcomes between different cohorts of members?


In the context of these questions, richness of debate and some different conclusions in vfm assessment criteria is to be welcomed, so all of us charged with governance should give very careful consideration to what criteria we want to use. Our obligation is to assess value by reference to members’ best interests, rather than by reference to what members say they value. We might aspire to arrive at a point where there isn’t a great deal of difference between the two, but we aren’t there yet.

The author of this piece (the original mystery blogger) is Julius Pursaill.



This piece was first published in Investment Week on April 7th



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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7 Responses to Radical thoughts about “value for money” – from Julius Pursaill (aka mystery blogger)

  1. I agree. Two further thoughts. 1. If we are going to consider members opting out of defaults a good thing in itself (as evidence of engagement, and engagement apparently being a good thing in itself under some possibly flawed theory of competition or autonomy) then we need some evaluation over time (over a lifetime?) of whether those who opt out of defaults I’m fact do better or worse. 2. The cohort issue is very tricky. What would the measure be? We are soon to publish some models that show that dc pension outcomes depend in part on what kind of wage inflation happened when in a person’s work history leading to vastly different outcomes for equally behaving people only 5 years apart.

    • Alan Chaplin says:

      I wonder where the view that engagement is good came from. As far as I can see, the best (or at least a very good strategy) is to pay contributions in and then leave them alone. Every time a member does something with their investments they are just as likely to damage their final outcome as they are to improve it (if not more likely).

      If you believe a default strategy is not very good, then encouraging everyone to opt-out and try to devise their own seems bizarre to me – surely if you can tell that a default is poor, then you can improve it so do that.

  2. henry tapper says:

    I look forward to that research. There is still a feeling – especially among advisers – that outcomes can be improved by DIY investment strategies and that schemes with high default take-up (like NEST) are failing to engage with members. IMO members want information on how their defaults are doing rather than choices on other investment options.

  3. George Kirrin says:

    Julius is Royal London’s IGC chair, so you’ve already reviewed his reports, I think.
    Julius has 20 years’ executive experience within the insurance
    and asset management industries. He has a further 15
    years’ experience of providing independent investment
    and pension governance to a variety of organisations.
    Until recently, Julius was a Trustee member of NEST
    Corporation where he chaired both the Investment
    and Risk Committees. In addition to governance roles
    within the Royal London Group, he is a Governor of
    the Pensions Policy Institute and holds governance
    roles with Heineken, Prudential and RBS.

  4. henry tapper says:

    Very importantly “Phil” not “Philip”

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