So here are my ratings for the principal IGC reports that I can find. There may be more reports skulking out there and I’ll be adding them if they get reported to me!
As you can see, they are a pretty mixed bag. Most IGC reports are getting better, one or two have had bad years and are getting worse. It’s clear to see that – at least under my very subjective system of analysis, some Chair’s are better at engaging than others, some are consistently effective and one or two quite lazy. But it’s in assessing value for money (VFM) that there’s most diversity.
As a general trend, I’d say that VFM is becoming better measured, if only because we are finally seeing slippage scoring creeping into (most) reports. I haven’t seen a report that makes the connection, but it is now possible to restate all the leading workplace pensions in terms of their cost of ownership to the member. It’s easy, add the AMC to the slippage score and you get the total cost of ownership.
It doesn’t matter too much if the slippage costs are trending to zero (they can even be positive in a lucky year). It matters a lot if – like Fidelity – your slippage costs for your main default fund are 0.31%. If you’re benchmark is to beat an index by 1% and you’ve got a 0.31% cost disadvantage, that’s like running 100m and starting at the 131 metre start! You’re giving yourself a lot of catching up to do.
We have yet to see someone take every one of the IGCs workplace pension defaults and put them up against each other so that we can see costs and value in a single table. This is something that I plan to do in the next twelve months, and to do so regularly. This in fact is my plan for Pension PlayPen 2.0 (and a whole lot more).
I would have liked to have seen more overt benchmarking (rather than mentions of “good funds” and “basic funds” as one IGC coyly called their rival’s approaches. I want to see the concept of risk-adjusted performance introduced into the value equation. I want apples to be compared to pears using such measures so that people can see on a price and risk adjusted basis, how their pension fund is actually doing.
Thankfully, we have seen a falling away of fuzzy metrics relating to the “member journey”, the only hard metric I could see working for a proper benchmarking would be a workplace pension system of net-promoter scoring. That isn’t going to happen so long as the provider’s are paying the bills and they buy-side (e.g. you and me) aren’t shouting for better.
That’s why I am so interested in IGCs , their work and their reports. You can’t of course directly correlate a report with a provider. Hargreaves Lansdown aren’t rubbish just because their 2015 report was. Black Rock aren’t lazy, just because it’s IGC sat on the beach for a year. But when you read Old Mutual’s report and see the horror story fund charges and no slippage figures and the Chair is still giving the provider a thumbs up for VFM, then alarm bells begin to ring.
That’s why I single out Sir David Chapman of Virgin Money who becomes the first IGC Chair to refer the provider to the FCA for wilful negligence (not reinvigorating the default to take into account pension freedoms). Well done Sir David (and sorry for getting your photo wrong).
Although I consider Zurich’s IGC a lazy bunch (and I know that at least one large employer shares my frustration), I do think the direction of travel its Chair – Laurie Edmans has taken the IGC is a good one. Zurich’s IGC is the only one that challenges the received idea. Zurich’s customers tell the IGC that dealing with Zurich is not a pleasant thing. As Edmans points out, relative to its peers, the Zurich User Experience may not be bad, but relative to other consumer experiences, Zurich’s UX isn’t great. That’s why a universal measure such as net promoter scoring will work, and why the wasteful benchmarking projects embarked on by the IGCs so far – haven’t.
I’m going to be writing a lot about this year’s IGC reports in various pension periodicals. It seems that investing a few days in reading the reports is the best way to understand what is going on behind the scenes. I can do this work because all these reports arrive at the same time and I can get through them in quick time. Unfortunately, the same cannot be said of the Chair reports of the large occupational schemes – and in particular the master trusts. These dribble in throughout the year and I never get sent them, so I have no idea about their publication.
I would like to collate the chair reports of NEST, Peoples, NOW, Smart , TPT and a few of the insurer master trusts, so at least there is a library of the things on one website. But I think it is unlikely that I’ll have time for this without help. I assume that the Pensions Regulator holds such a digital library, is there any chance- Lesley Titcomb, you could publicly display all the reports you receive, so that people like me can go compare?