My key words in the title are “we” and “our”. The Independent Governance Committee’s set up as a result of the failings in contact-based workplace pensions identified by the OFT, are for us – the consumer.
- They were not set up for the FCA to monitor.
- They were not set up as supplementary marketing support for insurers.
- They certainly weren’t supposed to be a sinecure for ageing pension executives.
Like the trustees of master trusts, the IGCs have a job to do and that is to keep their workplace pension providers honest.
We have to judge IGCs by their words (their annual reports) and by their actions (evidence of improvements).
Over the past three years, I have reported on IGCs and the results have been recorded and curated on this blog. In summary, this is how I have found they have performed against my three key metrics
I am happy to share these results in full with anyone who wants the spreadsheet (firstname.lastname@example.org).
Reading, reporting and recording has been a tedious business and (to begin with) a lonely one. Thankfully, ShareAction are now doing this job with a professional zeal that I cannot match.
The first report was produced early last year and looks at IGC performance, though a similar lens to mine. You can read this report here
The second report was on engagement and can be found here. This report produced a number of recommendations for IGCs and other fiduciaries to get proactive with.
Share Action has the human and technical resource to dig much deeper into the issues of governance that form the core of the ESG equation. What they found was no more pretty than what I found.
Stephen McCabe MP
Last week Stephen McCabe, a labour MP who sits on the Work and Pensions Select Committee asked some awkward questions in Parliament about the effectiveness of IGCs.
This was picked up by Stephanie Hawthorne of Pension Expert whose wrote an article quoting both Share Action and me.
McCabe quoted the ShareAction report, asking: “How did you get to a stage where you gave them a clean bill of health when this was happening and you were aware of it? Do you accept the ShareAction report?”
He went on to probe into what the IGCs were doing proactively
McCabe also asked if IGCs could “be more proactive and drive providers to take robust action earlier”, if the FCA had been successful in improving IGC quality, and whether the watchdog would issue guidance for them.
From the response of the FCA , it was clear that the Share Action report had been read. They accepted that value for money is still a vague concept that the IGC has not nailed. This is the FCA’s Pritheeva Rasaratnam
You are absolutely right – there were varying standards of reporting. One of the things they [ShareAction] recommended we do was issue further guidance on value for money, to help IGCs. In fact, that is one of the priority actions coming out of our joint strategy with [the Pensions Regulator].
“We are going to work with the Pensions Regulator to try to set out a bit more guidance about what value for money means and what we expect IGCs to do when they assess value for money.
What can be done?
Clearly what is needed are suggestions that aren’t vague and will be effective. I sense that the FCA (and tPR) may still be looking for positive suggestions.
In my view, there is no point in issuing further assurances that “members, in the view of their IGC, are getting value for money”, when clearly this cannot always be the case. Were all workplace pensions giving value for money then they would all be equal, we might as well collapse everything to NEST and be done with competition.
Some people have got value for money from workplace pensions and some people haven’t.
What’s needed is a system that tells people what they’ve got by way of value of money- even if the answer is unpalatable.
Telling someone that based on what is in their pot and what went into their pot, they have got good or bad value for money is something that I want to do for millions of people who have pension pots. My way to do so is via the IGCs and the Trustees of master trusts.
The reason that IGCs and Trustees want to co-operate is that they understand engagement – they have read the ShareAction report and they want the people they look after to have meaningful information about their money.
Forget “attribution of blame”, what scoring value for money is about , is a way of getting people to own their pension pot and understand what has gone right and wrong.
Once you have got people in the habit of asking for and finding out what value they have got for their money, you are on the way to getting them interested in how to better manage it, increase the pot and how to spend the money on themselves and their loved ones.
A lot can be done, but first we need to judge our IGCs on how willing they are to look again at value for money, get proactive in improving it and how they write their 2019 reports.