Has Tata the courage of its conviction? (the workplace pension that dare not speak its name)

tata steel.PNG

Available to all Tata Steel workers.

 

It I’ve been in correspondence with a steelworker who wrote me this

Over the past few months when my work colleagues at TATA have been talking about transferring out I suggested the TATA Aviva Plan to them as it is a good DC scheme with very low charges.
They have been to see their IFA’s and are transferring to other good companies like Liverpool Victoria, Royal London etc.
I have considered transferring to Aviva myself and actually started the transfer process but after doing a lot of research online from various sources (including Pension Playpen) I cancelled my transfer to move into BSPS2 instead. I hope I’ve made the right decision as if I decided to transfer out of BSPS2 in the future, transfer values will be lower?
I, like many others have increased our top up contributions (through salary) into the TATA Aviva DC Plan as we benefit from tax relief and lower national insurance. We can access our Plan account information online through Aviva’s excellent website and although the account was only opened in approximately April 2017 the balance is now becoming substantial.
As you have said in one of your previous blogs (Commission – the charge that dare not speak its name),
 I would like to think that TATA have chosing carefully and are keeping a watchful eye on where our money is going as over time there will be large amounts building up in these DC accounts?
I have some reassurance in this as we received information from TATA about the Aviva Plan in March 2017 which included
It is rare to hear someone trusting TATA to do the right thing by staff. Having researched Aviva’s workplace GPP for some years, Pension PlayPen can endorse it as excellent, it has a good IGC and it rates highly for its investment and at retirement options. TATA took advice on the plan from Thompsons Online Benefits and negotiated a keen discount for members. TATA has done everything right and this plan offers stunning value for money relative to most options available to members transferring out of BSPS.
The plan accepts transfers from occupational pension schemes (including BSPS) and could have been a default option for those who wished to transfer advisedly but invest using a guided pathway (the Aviva Lifestage Approach). The plan even has its own financial adviser!
This gentleman cancelled his transfer because he sensed more conviction in the future of BSPS2.
In another mail he points out
I think a lot of people who have asked for their British Steel Pension transfer value quotations didn’t consider the Aviva Plan as it was right under their noses and they overlooked it? As you quite rightly say, this should have been promoted by TATA to those exercising their CETVs
and
Aviva have previously stated that they haven’t actively promoted the fact that the TATA Aviva GPP can take CETVs as they don’t particularly want to be seen to be encouraging DB Transfers.

Just how confident are we in our DC plans?

I get why TATA and Aviva did not want to be seen to be intervening.  But had the TATA workplace pension been used as a benchmark against which the solutions put to those transferring away , what would have been the outcome?

  1. Would it have prevented advisers promoting inappropriate investment options?
  2. Would steel-workers have spotted a good thing and flocked to the safe harbour?

I think the answer to both those questions is no. Even if you go to the TATA Steel Personal Retirement Savings Plan website, (hosted by Aviva), you get no sense of the value that plan offers.

The plan’s charges only a third of what someone working in a small company would pay for the same thing. The default fund is available to members at an all in 0.26% pa charge!

The nearly 0.5% pa saving on the standard 0.75% charge for this fund , negotiated by TATA,  is equivalent to over £200 pm on a £500,000 transfer.

The guided pathway is effectively a free feature that cuts out the need for a middleman, saving a further £200 pm.

As Aviva say of themselves, they operate to the highest standard of governance, something I can totally endorse – I have met their IGC chair twice this year and they take governance seriously.

Aviva’s plan competes with the IFA solution (LV, Royal London etc.) and for those who want a well governed simple solution it has to be on the short-list.

And yet, not one IFA I spoke to has put this plan forward to members of BSPS actively at work at TATA and this gentleman is one of only a handful of members who had considered the Aviva GPP as an investable option.


Despite paying up to 10% of salary into it, TATA do not promote their workplace pension!!

It has come to a pretty pass when a perfectly good, very well funded DC plan has become an embarrassment. But that is what the TATA Steel Personal Retirement Savings Plan is.

The truth is that neither TATA or Aviva were or are prepared to stand up and say that the cash equivalent transfer value taken by the former BSPS member would be well-invested in this plan.

Instead of being an employee benefit, this “PRSP” is hidden away (as in a cupboard). Despite spending hours on its website, I still can find no mention of the plan’s unique feature – its heavily discounted charging structure!

I can only call this a massive failure of nerve.

So long as workplace pensions are this shy, then they will never get a date with the workers they are trying to engage. Might it not be time for Aviva to consider raising its game and having the courage of its convictions?

Or does Aviva secretly agree that it cannot offer – through this heavily discounted product, something that steelworkers need? If so, what is it doing offering this product at all?

Perhaps Aviva should consider moving to a CDC approach and showing a bit of bottle.


 

If they don’t have confidence in their pensions why should we?

I will be sending this blog to the Chair of Aviva’s IGC committee and asking that these questions be discussed at its next IGC meeting.

I will be doing exactly the same thing to the chair of the IGC committee at L&G (which runs a similarly priced service to the members of the Greybull and Liberty businesses which employ many other BSPS members.

All over Britain , people are taking CETVs and investing them in almost everything but their workplace pensions. I can understand a SIPP as a wealth management tool, but I cannot see why ordinary people should be shoe-horned into SIPPs when they have no pretensions to “self investment”.

Workplace pensions should be the gold-standard – instead they are the “dustbin option” as one steelworker called PRSP.

That can’t be right – something has to change.

tata steel

The plan members forgot.

 

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in advice gap, pensions and tagged , , , , . Bookmark the permalink.

3 Responses to Has Tata the courage of its conviction? (the workplace pension that dare not speak its name)

  1. Michelle Cracknell says:

    The point that I take away from this blog is how sensible the steelworker is and the logic that he has applied. It goes to show that if people are given high quality, impartial guidance, they do make informed decisions. It is when they are in an information vacuum that panic happens. Well done Henry for helping the member.

    Liked by 1 person

  2. Mark Meldon says:

    Henry, I agree with what you say in the main, but I think that one has to remember that a (decent) IFA will take on an individual with a CETV as a private client and thus consider their financial circumstances “in the round”, in order to offer the right combination of advice.

    I agree that the Aviva plan at Tata is very attractive and likely to be the “best” option for the majority of deferred members transfer values, especially the younger ones. However, there will be individuals for whom something a little more “bespoke” is justified. What I mean is that some might wish to retire now or make use of flexi-access drawdown in the near future despite that attendant risks, opportunities for (perhaps significant) losses and ongoing costs. Whilst this can be done with companies like Aviva, and that can be a perfectly satisfactory solution, it is my honest experience that for those individuals with larger “pots”, a “proper” SIPP can be a better option.

    This can be economical and well-managed without needing to use any kind of DFM (I deliberately choose not to have any kind of discretion over my clients money – “trust me I’m an adviser” has undoubtedly cost many people a great deal of money) if one chooses wisely. For instance, I use a SIPP from a firm of pensions administrators in Bristol for several reasons but the main ones are that they charge clear, transparent, “pounds and pence” fees, offer my clients excellent administration and, importantly, are really nice people to deal with. Once the SIPP “skeleton” has been set up, the cash is held in a Metro Bank account and I then agree an investment strategy with the individual. This will involve cash on deposit, Nation Savings products, investment trusts, index funds and the odd OEIC. Such an arrangement will generally cost about 1% per annum to own, significantly more that the TATA Aviva scheme, but I genuinely believe that access to 150-year old investment funds like Foreign & Colonial (just as an example) offers a good chance, in combination with trackers, cash and other assets, of producing the all-important rising dividend stream that pension plan holders need.

    However, you do need a reasonable sum to make the SIPP (any SIPP) worthwhile, so I recommend insurers for those of more modest means as this can often be a better approach from a value-for-money perspective.

    It’s not just Steelworkers, you know. Only yesterday a couple, newly moved to my town, came to see me. They were advised by a well-known “national” IFA to take up SIPPs using a DFM arrangement (I don’t have all of the details yet, but I have got the gist of things). The husband has a fully crystallised fund of about £150,000 and the wife £80,000. Unbelievably, they were “advised” to take their PCLS and put it in the bank! The wife is drawing down £1,000 a month as “this is likely to be sustainable” – I ask you!

    Something else that seems to have been all but ignored for the Steelworkers who wish to retire is sensible consideration of annuity purchase (perhaps as a “blended” arrangement with drawdown). Despite relatively low rates, a £500,000 fund is still likely to yield getting on for 4% today from a guaranteed annuity (less, of course, with indexation), which isn’t too bad.

    Do you think annuities have been “forgotten” as the “adviser” can’t be “clever” and charge 0.5%-1.00% at year for “managing” them?

    Best,

    Liked by 1 person

  3. henry tapper says:

    The Tata Aviva GPP offers advisers the opportunity to be paid from the fund by adviser charging, the L&G gpp doesn’t.

    Liked by 1 person

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