Reassure, the life insurance consolidator owned by Swiss Re, continues to swallow up large numbers of what the market calls “legacy” pensions.
If you took out a pension in the past and stopped paying, you still have rights to that money, even if people call your money “Zombie money”. And every pound you have within Reassure is just as valuable as the money you are saving today.
Well that final sentence deserves some adjustment, it “should” be just as valuable. Unfortunately it may not be as it may be invested in “initial” units, which have to grow by anything up to 6% pa , before your money grows at all. So it’s pretty important you get a grip on any money you have in these legacy policies, and do the best you can with it.
Which brings us to the IGC, ably run by Chair, Zahir Fazal. I say “Chair” as it applies that the IGC could as easily be run by a woman. Last year I hoped that we might see a woman on the committee but it remains an all male preserve – for which I am sure it is the poorer,
This year’s report is 33 pages long – more than twice as long as last year’s. Though some of this is down to the inclusion of stock photos, most of it is down to some performance tables in the appendices. Giles Payne, the IGC’s investment man, needs to look at these tables as they don’t make much sense to me.
These seem pretty random to me and don’t add much to my understanding of what is really going on with the majority of money under Reassure’s control. There is some talk of the small amount in with-profits providing top quartile returns but there is really nothing in the report that suggests to me there’s much going on on the investment front.
As reported by other IGCs, “external” fund managers – aren’t coughing up slippage numbers, which is worrying for Reassure as they don’t have any internal managers. I suspect that IGCs are hiding behind “external” – pretending it’s not their fault. The truth is the opposite, the decision to take people’s money into pension contracts, was based on a fiduciary responsible for that money. The decision to outsource the management of that money was taken by the insurer, the insurer has as much responsibility for “external money” as internal money. So the value for money section of this report is marked down – there is no real idea of how much of member’s money is being spent by these external managers, and how much is invested.
I’m worried too that the Chair tells us early on that he is widening the scope of value for money work to consider things other than performance and costs. Presumably he means the capacity of the insurers to work with members to get the best possible deal. But , as the Chair points out, most people aren’t interested in responding to calls and are simply disengaged. It seems wrong to judge an organisation on its capacity to talk to its customers about a product that has a lifetime value, but there seems little else that Reassure can be judged by.
By the end of the report’s deliberations on value for money, I was coming to the conclusion that it was running out of things to say. It’s a pity that more was not done last year to look at the engagement of external managers with ESG, though this does appear to be on the 2018 agenda (along with getting some facts on slippage). I can’t go so far as to say Reassure’s IGC is failing to get to grips with value for money, but neither can I say they are getting very far. The IGC lives in a penumbra of half ingested information and I’m giving it an amber.
Is it effective?
The report shows that in their limited scope, the IGC is very focussed on mitigating the impact of the charges of the various contracts its members are in.
How effective you can be , when you are battling with a shareholder who has purchased the company in order to wring the maximum value possible out of the book. Each concession made on charges is another line gone in the P&L and a little less embedded value retained by Swiss Re.
In practice, the IGC should be telling everyone who reaches 55 – to get out now – unless they really value their contract. The 1% exit charge will almost certainly benefit members more than hanging around for a death by a thousand cuts.
I find that the Chair’s approach avoids the usual prevarications, he is bold and fearless and I’m giving him a green for clearly putting up with no nonsense. All the same, there is a lot more that the IGC can do to get members to realise they could be a lot better elsewhere!
The introduction of case studies, simply laid out and showing where value has been created for them – since the start of the IGC – is very good.
The IGC has clearly gone away and re-thought how the report itself can be used to engage people and is the better for it. I am giving Reassure a green for engagement.
There’s not a lot to dislike about this engaging report. It is not going to set the world alight but nor is it bringing IGC’s into disrepute. It is – to be fair – just what we should expect from a functioning IGC – but it could do with some diversity from its board!