Am I getting value for money from my workplace pension?
is a different question to
Did I get value for money from my workplace pension?
the difference is more than one of present and past tense.
The first question requires a subjective assessment of the processes, costs, charges and utility of the workplace pension in the eyes of the expert
The second question is a matter of fact and can be answered yes or no, with reference to a benchmark of “how others have done”.
Too early to say?
Since IGCs (and latterly trustees of DC workplace plans) have had to make a value for money statement, there has been too little time to amass sufficient data to assess whether people have indeed had value.
Of the major IGCs , only Prudential have decided to test value for money by looking at the outcomes people have actually had. The vast majority of IGCs have preferred to answer the question in the present – using some kind of balanced scorecard of the value offered to members and the money they have paid for it.
This methodology has been largely discredited by the general research carried out by NMG in 2016/17 which found that ordinary people really didn’t give a hoot for any of the attributes of a workplace pension other than its capacity to deliver results at the end of the day. This suggests that outcomes based value for money assessment knock qualitative assessments into a cocked hat.
We are now getting to a point where most workplace pensions have been auto-enrolling members for at least five years, the argument that we cannot measure outcomes because we have insufficient data is becoming weaker by the day.
Do they mean me?
Most people aren’t interested in general statements about value for money. That is why there is never any comment in the press along the lines of “XYZ IGC Chair says XYZ has delivered value for money”. You might as well say that the sun rose this morning.
People are very interested when you tell them that based on their personal outcome , they got or didn’t get value for money from their workplace pension.
When we analysed my workplace pension – which I’ve had since 2012 – this is what we found.
This told me that relative to an average experience, I had scored 76/100. This number was not based on anything but the value of my pot against the money I had paid for it. It’s only comparator was the value I would have got , for the same contribution set, had I invested in a typical way.
I can tell myself that I had value for money and can remember that score of 76 which I can compare with other value for money scores from my other workplace pensions.
Do they mean me? You bet they do! This is my value for money score.
The challenge to workplace pension providers.
The question “did I get value for money” , begs a personalised answer. It is not answered by a generalised answer around whether I am getting value for money, it isn’t properly answered by a “people like you got value for money” answer. People actually want to know about themselves.
We ask people to engage with their workplace pensions, but if they ask a specific question about “how they’ve done’, we give them performance charts based on metrics that have nothing to do with them (and which are generally designed for experts).
If I submitted a subject access request to Legal and General this morning, they would give me all the information I needed to give myself an AgeWage score. I can download from my website my contribution history which shows all the money that went in and all the money taken out of my policy since I started giving money to them.
If every policyholder with a Legal and General Worksave Pension did the same, I suspect that it’s robust machinery would hold up. But the same might not be said of other workplace pension providers and certainly could not be said of older pension systems.
The challenge to workplace pension providers is that every one of their policyholders or members, could – at any time – ask for all the information that it holds on them in digital format.
Indeed an IGC or Trustee could make such a request on behalf of its policyholders or members.
While it is doubtful that the Data Protection Act would make a bulk request on behalf of members legally enforceable, the duties of a Trustee or IGC Chair include making a value for money declaration to all policyholders/members.
The fact is that we are not getting individual value for money assessments not because they can’t be done, but because right now, providers are unwilling to do the work. It could be added that the IGC/Trustee chairs have yet to have seen anyone prepared to help them get this information.
Assuming that we have landed on a methodology for doing the work, assuming that telling people how they’ve done is valuable to them and assuming the regulators see individual value for money scoring as valuable, then this expression of value for money looks likely to catch on.
If it isn’t adopted by IGCs and Trustees – it may mean individual subject access requests being made on an industrial scale. This is a challenge to workplace pension providers.
Making meaningful disclosures
These words are directed at those in fiduciary control of IGCs and DC Trustee Boards (especially master trusts and the larger single occupational schemes).
GDPR and in particular the Data Protection Act 2018, give your customers rights to see their data in a digitally readable format.
Elizabeth Denham, the information commissioner, wrote an article that make this very clear. The whole article can be read here.
Let me quote three statements;-
Organisations should know what they’ve got and where it is, what they’ve done and why. Staff must have time, resources and training for creating and filing records.’
‘Organisations also need to make sure they have the appropriate technologies going forward to ensure that digital information is properly managed in the future.
That means technologies that can help to organise and search existing digitally stored data, as well as helping with disposition. Skills in digital management of records must be stepped up to meet these needs.
Simply saying it was “too hard” or “too expensive” to provide this data will not be good enough, either for the Government or for the people.
If we are to make disclosures about value for money, then they need to be specific and outcomes based. That will mean providing benchmarked statements of value for money similar to the one I’ve pictured. Either these can be provided piecemeal through individually generated subject access requests or they can be provided wholesale, through trustees and IGCs.
I would ask you , as you lead up to your next round of statements, to consider the implications of GDPR on disclosures and ask yourselves where you stand in your duties to members to properly answer the question
“Am I getting value for money?”
but also – the more difficult question
“Did I get value for money from my workplace pension?”