The Aegon IGC report is published and available here. It’s normal for IGCs to have at least five members , I was very sad to hear of Linda Woodall’s death during the year, shew was a consumer champion at the FCA, at the point of publication Linda had not been replaced.
During the year Colin Richardson was replaced by Alison Bostock, both are corporate appointments by Pitmans Trustees. The chair, Ian Pittaway is a pensions lawyer, the other two members of the Committee are corporate appointments from Aegon. The composition of the committee is uber-corporate and this shows in the tone of the report which is measured and consistently reassuring.
The report is beautifully written and it gets a green for its tone. It sets out to reassure and does so most effectively
Value for money
The two things that matter most to members (we learn from NMG research are costs and returns – together they make for good or bad outcomes in terms of the amount of money in the member’s pot.
This year, for the first time, IGCs have had the right to detailed cost disclosures under MIFID II. These – curcially – now include the costs of transactions within the funds.
Although Aegon measure value for money against a range of soft factors (communication, security of assets and “quality benefits and services”, the key issues impacting outcomes are the ones members are likely to focus on
We know Aegon’s policy charges, these vary scheme by scheme but are “competitive”. Let’s look at how the report on transaction costs concludes
Our initial conclusion is that on the information available to us, the total costs you pay for the funds Aegon offers you are reasonable and in line with what we would expect relative to the market. We will be carrying out rigorous analysis next year as more data is forthcoming.
Here is what detail we are given
One of the managed funds on the Aegon platform has transaction costs which exceed the charge cap. True it is not the default, but just how much value did investors get for a 0.91% drag on returns?
Clearly the IGC did not get all the information it needed, but it got enough to see some extraordinary things. The member is not privileged to see where these high costs are being incurred and might well take issue with the statement below
In a world demanding transparency, Aegon IGCs failure to publish the transaction costs of the funds members are paying into, counts as a failure.
Now let’s turn to performance.
Policyholders want to know what they got as performance, not abstract performance numbers taken out of the context of their experience.
This is particularly the case when they are consulting their IGC.
So what is a policyholder to make of this strange table showing performance?
This information is just dropped into the report without comment. There is no information as to whether these are the returns policyholders actually got or whether policy charges were deducted on top. So for a member, this information is pointless.
If one of the key funds underperforms by nearly 2%, surely this is worth a comment beyond “disappointing”. How much of the 2.6% underperformance relative to the Aegon Default result from high charges? Was this the default fund with the 0.38% transaction costs? Why did it go overweight in equities?
Frustratingly, the reader is presented with information suggesting a huge range of outcomes (even within the defaults) but assured that “Aegon is providing value for money”.
I find the section on value for money untransparent and bamboozling. There is nothing here to get your teeth into, the beautifully written assurances are pointless. I give this report a red for its value for money reporting – it really isn’t good enough.
2018 saw Aegon acquire BlackRock’s DC business (and the IGC took over oversite from BlackRock’s truly awful IGC). Strangely no mention is made of the BlackRock IGC. The transition does not seem to have been without hitches.
The report comments on a breakdown in investment reporting from the BlackRock propositions funds team with displeasure.
The Black Rock business will form part of the forward looking “Digital Solutions” business that Aegon has been migrating customers to for some years. This process has been one of the best customer initiatives at Aegon but sadly it is stopping
We read from the report
I hope that the IGC questioned this business decision (though there is no evidence that they challenged it). The partnership announced (an outsource to business services group Atos) will hopefully deliver good service, but that is no reason to maroon customers in Aegon’s legacy book.
Was a deal done with Atos to ensure it revenues, is this really value for money and what does the IGC really think of this? Again there are more questions than answers.
I take this as an example of the non-committal nature of this report. It pulls its punches so that the reader is unsure of the IGC’s position. As with the position on VFM, the IGC appears to be endorsing Aegon while providing evidence that all is not quite well.
The result is a slightly queasy feeling where the reader is left unsure what to think. I give the report an amber for the effectiveness of the IGC over the year. They may have been more or less effective, but as so much of the report is even-handed to the point of blandness, I just can’t tell!
I hope that early in 2019, Linda will be replaced by a consumerist prepared to challenge the very corporate feel of this IGC. This is a polished report that really says very little about what policyholders are getting and paying for. It is accomplished and it is hard to criticise , but I struggle to understand where Aegon are really being challenged.
The relentless analysis of soft factors in the VFM analysis hide the lack of help given to members in understanding outcomes compared with costs and charges paid,
In the final estimate, this is a model corporate report that ticks all the boxes but is really pointless.