SJP policyholders deserve an IGC. They have a great GAA – but that’s not enough!

st james place

St James Place is one of Britain’s largest financial institutions, it is a FTSE 100 company with 2017 revenues of over £9bn. It is therefore surprising that its exposure to workplace pensions is so limited that it does not need to run an Independent Governance (IGC)Committee, but instead is externally governed by a Governance Advisory Arrangement (GAA). In any event, I would question whether the “kid brother” status of the GAA is appropriate for an organisation with the responsibility and reputation of St James Place PLC.

But there are two further matters which suggest to me that SJP shouldn’t be “getting away with” sub-standard scrutiny.

The first is that it has within its control, rather more “relevant scheme” for workplace scrutiny than it previously thought.


Why the extra 6000 policyholders with nearly £1bn of assets weren’t previously included isn’t clear, though the GAA make it clear that they weren’t there in previous years.


On its own, I would suggest that this should be ringing significant alarm bells at the FCA.


However, there is a second significant link between SJP and the workplace which hasn’t been disclosed and isn’t within the remit of the GAA to discuss. I’m referring to the very significant inflows to SJP from workplace DB pensions through cash equivalent transfer values (CETVs). For obvious reasons, SJP are coy about what percentage of the £90bn under management came to them this way. In the last quarter alone, SJP£2.2 billion came into the pension offering, a figure 48% higher than in the first three months of 2017.

All things else being equal, one has to assume that the surge in pension assets is in line with the surge in transfers identified by the Office of National Statistics.

ONS funds

I have argued elsewhere that this money , originates from workplace pensions and has been granted its tax-reliefs and NI exemptions as part of the occupational pension framework. That is should now be excluded from the scrutiny of an IGC (or with SJP a GAA) is illogical.

In the case of SJP, I have seen evidence from large occupational schemes, of SJP topping the list of wealth managers to whom trustees have been writing cheques.

The IGC structure is well suited to examining the value for money , not just of ongoing workplace pensions, but of money formerly in workplace pensions. SJP have more of that money than (I suspect) any other wealth manager/ provider in the country and they should not be operating a GAA rather than an IGC. Let’s hope the GAA is upgraded in 2018/19.

A very good GAA report.

Apart from the increases in relevant schemes and the huge increase in pension assets (from DB), there is a third reason for upgrading SJP’s governance from GAA to IGC. The GAA – under the chairmanship of Pitmans’ Colin Richardson, has produced an excellent report – under the restrictions of being a GAA – a superb report.

The report is well laid out, well written, interesting and very effective. Against considerable headwinds it comes up with a meaningful value for money assessment.


This is very far from a clean bill of health. To only give SJP – a FTSE 100 company, an overall assessment inches from poor is a strong statement. Had the assessment been one notch further into the red, I imagine that Richardson would have had no choice but to refer SJP to the FCA. As it is, I think there is strong grounds for doing so in 2018, unless things improve fast.

A healthy scepticism

At no point in this quite long report (29 pages), do I feel that Richardson and his team are taking anything at face value. Early in the report we read

The GAA took into account the high levels of policyholder satisfaction reported by St. James’s Place.

but the GAA return to this subject – with a hint of concern

as this is a high quality, high cost proposition with St. James’s Place claiming high policyholder satisfaction the GAA sought to review the methodology of the policyholder satisfaction surveys. The GAA would like to review this further in the next year.

What appears to be direct feedback, is anything but…

St. James’s Place will receive and filter all policyholder communications, to ensure that this channel is not being used for individual complaints and queries rather than more general representations which may be applicable to more than one policyholder or group of policyholders. Where St. James’s Place determines that a communication from a policyholder is a representation to the GAA, it will be passed on in full and without editing or comment for the GAA to consider.

This is an editorial policy that the Stasi would have been proud of. The GAA is quite right to push back.Stasi

Inconsistent investment management

A more substantive, and even more worrying concern for the GAA is that it finds it impossible to measure what is going on with the £1.25bn of assets it now governs; its headline criticism is that

..the selection of suitable investments from the range of model portfolios and other funds appears variable

This is because the management of these relevant schemes is in the hands of individual partners, who do not reveal the secrets of their management. The GAA does not see this as at all beneficial

Therefore, we believe this is likely to lead to more appropriate individual investment strategies for policyholders. However, the review showed example portfolios for sample policyholders remaining static over the medium term and we wish to review further next year the frequency and depth of SJP Partner review of portfolios

The question is one of sustainability over time

Whilst the GAA views the process of construction of ‘model portfolios’ as strong, the GAA questions how easy it may be to maintain such performance in a general lower return environment if we are entering such a period.

This is a sound analysis, if it cannot be measured, then there is a governance failure, the SJP investment model – is (in terms of independent governance) ungoverned. The GAA rightly highlight this issue as a key determinant of its lowly VfM rating.

The thorny issue of SJP member costs

The attitude of the GAA to cost disclosure and cost management is clearly hardening. Costs fall into two categories, what policyholders pay for “product” and what they pay for “funds”.  On product charges the GAA has this to say

the GAA have noted that the impact of charges varies widely between policyholders. St James’s Place have informed the GAA that charges were under review in 2017 but no changes were made this year.

SJP are stalling and the GAA know it, had they the clout of an IGC, would they be knocking on the FCA’s door – I’d hope so.

As regards fund costs and charges, the news is little better.

Transaction costs will also be borne by policyholders, based on their underlying investments. St. James’s Place publishes details on its website in line with guidance from the Investment Association, and, like all providers, are awaiting further FCA guidance on the calculation and disclosure of transaction costs.
Limited information was provided on transaction costs, due to the difficulties of analysing dilution charges. The GAA will look in more details at the transaction costs in future reports. The methodology and timing have now been clarified by the FCA with an effective date of 3 Jan 2018. As such there has been limited time since then to meet the requirement within the reporting period. We are expecting to be able to provide fuller information next year.

The analysis of SJP’s investment governance is rightly favourable

The range of funds is determined by St. James’s Place and how it is tailored for individuals is determined by the SJP Partner, under supervision by St. James’s Place. This offers individuals a higher level of governance compared to most other workplace pension schemes.

But the GAA simply don’t have the resource to discover the investment management agreements behind the funds employed and whether SJP are passing on the economies of scale , its £90bn of assets should be providing its policyholders.


So – for reasons more to do with resourcing than intent, I cannot give the GAA a green – but only an orange, for its value for money work. I will however, be treating the SJP GAA going forward as if it were an IGC – were it a proper GAA it would have got a green. It does well for a role it has outgrown.

As mentioned earlier, I consider Colin Richardson has written an excellent report, which is engaging and interesting. It gets a green for its style, content and focus.

I am also convinced that the GAA are no patsies, that they clearly see what they cannot see clearly and will not relent from demanding more transparency from SJP. I give the report a green for its being effective – in the face of many headwinds.

St James Place, are ducking their responsibilities by not having a full IGC and they are getting away with blue murder on a number of fronts. Whether the FCA will call them to account in 2018, I don’t know. But I don’t think the current governance situation is satisfactory and I call on the FCA to upgrade the SJP GAA to and IGC ASAP!


In 2016 I published a full review of GAAs (including SJP’s which I called on to be upgraded). You can read this review here.

I have not published a full list of the other GAAs in 2017 or 2018, because of lack of time. I am concerned that many policyholders of small insurers and SIPPs are not getting the care they deserve from their GAAs. I am absolutely sure that the vast majority of these policyholders have no idea that the GAAs even exist.

The FCA might use the SJP example to more generally review GAAs. My next and – probably final – review of the year will be of Hargreaves Lansdown, a principal rival of SJP. Hargreaves Lansdown does support a full IGC.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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