For an Independent Governance Committee to work, there must be a means for it to interact with its membership in a meaningful way. L&G – uniquely to my knowledge – offer policyholders of their workplace pension the opportunity to come to their offices and quiz the IGC Committee. Yesterday was the day, I saw the window and jumped right through!
This is an impressive turn-out and it was complemented by talks from a number of senior people from Legal and General. It was entertaining, interesting and thought provoking but best of all, it gave people who are interested in their L&G workplace pension , a chance to share views. Mine is my most valuable liquid asset and I certainly had a chance to ask my questions!
What’s good at L&G
There’s a lot to like. The introduction of the Future World fund this year (the one used in the HSBC DC default) is good news. IMO the fund could currently be overpriced (at twice the cost of their bog-standard global equity product). But we’ve been seeing clients choosing it as the default accumulation fund and 50% of my money is now managed with the various tilts and screens that distinguishes it.
We heard from the Chair about various initiatives from the IGC to hold L&G’s feet to the fire on admin, the cost of fund transactions, member communications (Dermot’s pet subject) and on default management. I was pleased to hear that action is being taken to help employers with adviser designed defaults whose advisers have “gone away”, we see quite a lot of stranded defaults in our governance work at First Actuarial and we’d like to see insurers take responsibility for them. Default investment options need to adapt to changing times and times are changing.
LGIM are doing much good on corporate governance, we heard case histories of how they’ve engaged with companies like SNAP and help exclude them from indices for governance failings. We saw diversity in action as speakers came at us with a diversity of ideas and intelligence that really engaged the audience. This is an investment organisation at the top of the class.
What’s not so good
It was worrying that, despite my meeting earlier in the year where I told them this, the IGC still don’t get that the ITM Ease and PensionSync links are really not working as they should. Employers have problems with ITM Ease and the PensionSync link is only available through a few payroll software suppliers (Star, Xero, QTAC and one or two others). L&G need to do something to raise its game re small employers. It should have a clear strategy which helps advisers place business with it on a structured basis, what is happening now is a mess that needs cleaning up. I will be following up on this with the IGC.
The problems with closing one major operational centre- Kingswood – should not be used as an excuse for L&G. The administrative platform is in need of a refresh at the very least. I have spoken to L&G about this and know there are plans, I was sorry not to get mention of these plans from L&G directly.
L&G are valiantly trying to reach out to their customers, but they clearly aren’t getting all the right people to their events. Where were Liz Robbins, Daniel Harvey and the FSB yesterday? There was insufficient input yesterday from the SME segment of AE clients.
Also in need of some investment is the member portal which looks and feels 20th century. I know that L&G are doing work on this but the Chair seemed to gloss over areas where even L&G know they are behind the times.
And as for the IGC itself, it needs some diversity. We had two good talks on corporate governance from Sacha Sadan and Dame Helena Morrissey which raised some questions that I wanted answering. Helena talked around Andy Haldane’s question;
You can hire two but have three candidates for a job, two get 80% of your questions right, one gets 20%, why would you hire the one who scores 20%?
Andy’s (and Helen’s) answer was that if the person who knew little but what little he/she knew complimented what the other two both knew, you should hire the 20% er, and leave one of the 80% ers on the bench.
From what I can see, the entire IGC is made up of 80% ers. There were plenty of 20% ers in the audience, some highly articulate and clearly IGC board material.
L&G are getting really weak at knowing small employers, they are focussing on their big trophy clients and have a big trophy client chair, I urge them to let the IGC get itself a rep who is both a member and working for a smaller company. We don’t need L&G’s workplace pension to become another exclusive club like BlackRock’s, Fidelity’s and Zurich’s.
What of the future?
I’d urge L&G and its IGC to read yesterday’s blog about guided pathways. Most members of L&G’s workplace pensions have little idea how their plans can be used to provide them with retirement income. I say this as a member of a group plan with 300 pension-savvy members but as someone who speaks with ordinary people quite a lot.
At Tata Steel, there is an L&G plan and an Aviva plan and they are simply not being considered by members for transfer purposes. If you read Brian Gannon’s excellent comments on the blog, you’ll see that IFAs are simply not connecting with these excellent products (and why). Many L&G GPPs sit alongside DB plans that are shedding members at a fast rate, some of these members should be in SIPPs and some could do with the low-cost default management offered by workplace plans.
L&G need to wake up to the needs of ordinary people who want to manage their own drawdown , they should be looking at NEST’s suggestions for guided pathways, which – in the absence of collective solutions- are the next best thing.
The IGCs should be recognising that many people (like me) in workplace pensions are in need of default disinvestment options. So far, product development in this space has been weak and L&G can and should do more to hang on to its money – not through lock-ins but through positive incentives to stay.
If L&G don’t do this, people like me with SIPP off!
Why I can’t I write this kind of blog elsewhere?
I would like to provide my feedback to the trustees and IGCs of other workplace pension operators. I don’t think many of them want it! There are a number of exceptions, I think of NEST , NOW, Aviva, Salvus, Blue Sky, Smart and People’s Pension but I also think of the many insurers and master-trust operators who are busy spending money on benchmarking exercises and missing the chance to talk to payroll operators, the owners of small businesses and the IFAs and accountants who advise them.
I fear for IGCs and for Master Trustees, they are all too often collections of people who have similar interests, similar views and have similar blind spots. The worry is they end up becoming a club and a cost centre, rather than an open community giving value.
I can’t write this blog for other workplace pension operators because L&G is the only organisation that runs the kind of open forum that gives me this chance. If you enjoyed reading this and want me to do more work in this sector, contact your IGC of trustee chair right now and ask them why they aren’t doing more of this kind of thing!