The 2019 IGC report – a good read
I haven’t given much thought to IGC production values, but they’re the first thing you notice when you scroll through the Royal London IGC report. Someone has spent some time and money making this document look and read well.
The product of new Chair Peter Dorward, but the chatty easy style of the IGCs 59 pages is a world away from most of the reports I’ve read this year. You should be able to access the report here (moan to me at firstname.lastname@example.org if you can’t and I’ll send you the PDF)
Here’s the summary page (notably not an “executive summary”)
Other IGCs take note – the bar has just been raised.
Royal London – more now than a work in process
Royal London is an unlikely success story, a rag tail and doggie bag of unloved and unwanted life companies, it has grown to be the favourite life company of advisers and an increasingly recognisable brand due to its advertising and sponsorship. It has a charismatic CEO in Phil Loney (leaving this summer) and a pensions policy team that includes Sir Steve Webb. I own to being a convert and in case anyone thinks I’m not owning up to it, Phil and I get on very well.
Which is odd, because in years gone by I have been critical of Royal London’s behaviours. It didn’t offer itself to the general public as a workplace pension provider , insisting people came to it through a financial adviser, it has some amazingly bad legacy pensions on its books and its IGC reports read like marketing documents!
A moan about tone.
I’m afraid to say that whatever’s in the water drunk by Phil Green , is still there!
This is the first heading of the report
Who wrote that? Was it the Royal London marketing department? Anyone who comes to the report looking for independent governance is immediately on their guard!
This headline is in keeping with the general tone which is loaded to promote the Royal London proposition
In this paragraph I have highlighted the words that are loaded to promote a favourable impression of Royal London
Royal London continues to make changes to how it manages your pension and how it communicates with you. We reviewed the following enhancements made for workplace customers:
o Introduction of a new annual statement for Retirement Solutions workplace customers
o Communications related to an increase in required minimum contribution levels (known as phasing).
o Developments in the communications and support provided in the years nearing retirement.
o Communications explaining changes to workplace customers’ default investment.
o Changes to employer microsites to provide a better customer experience.
o New services introduced to support advisers review the quality and service being provided to workplace pension customers of Royal London and other pension scheme providers.
It’s one way traffic and its relentless throughout the statement. It’s wearing and it’s boring and can someone please bring a little balance in here!
Although this is a very well written report I am not happy with its tone, I am tempted to give it an amber because it doesn’t sound “independent”. But I won’t – I’ll give it a green – because this is the best written report I’ve read this year (and there have been some good ones),
Value for money
Has the Royal London IGC done all it can to report effectively on the value for money that savers are getting?
The short answer is “yes”. In line with the chatty “newsletter” style of the report, the VFM assessment starts by asking Royal London savers what they think of being in a Royal London workplace pension. This was done through YouGov who asked questions of savers with other workplace pensions. Here are the results.
The purple bars are Royal London’s the others are anonymous.
While we have to rely on YouGov and Royal London’s integrity that these are peer to peer comparisons. My experience of working with Royal London customers is that they are better informed because they are better advised and this is a vindication of Royal London’s insistence on advice being part of the employer’s selection process.
In a world where there is little engagement, Royal London employers and their auto-enrolled staff are likely to be better informed and so more likely to get value for their money.
This type of VFM assessment is fine, so long as it is backed up by quantitative research on whether VFM is actually being delivered in terms of outcomes ( as well as perception).
This is where the Royal London IGC report works best. When it moves away from soft values , it demonstrates a proper understanding of what makes for good outcomes.
Many of these measures are very specific to an advised proposition – “appropriate investment returns”, for instance. Not many workplace pensions can expect to see customer’s expectations of returns relative to risk, but this is what Royal London aspires to get.
In a world where standards of engagement are low, the mere aspiration to have this level of engagement (if only as a result of advice to employers) is encouraging, but it is also limiting.
There is only so much of these kind of employers, the Royal London strategy of selecting to work with IFAs is not “mass-market” as say NEST or NOW or Smart or People’s Pension is mass market.
The IGC report doesn’t really focus on this. It has to be said that Royal London’s strategy is underwritten by employers choosing to take advice and this self-selection enables these ambitious VFM measures to be relevant.
The bulk of the report deals with how the IGC sees Royal London performing against these measures and there are some really good sections which engage the reader in the issues behind ESG and responsible investment.
I encourage anyone with an interest in workplace pensions to read the central sections of the Royal London IGC report , to understand what can be done. I have no problem giving the VFM assessment a green
How effective is the IGC?
As mentioned before, the report in tone , is biased towards the provider. It leads us to wonder how hard the IGC is pushing back on the provider to get members a better deal.
Royal London’s relationship with it’s IGC is clearly very strong. The reporting in this report bears out the IGCs claims to getting what they want from Royal London and I am impressed by the granularity of the analysis of transaction costs , performance (relative to competitors and relative to expectations set by Royal London to it customers.
The impression in the detailed sections of the report is that the relationship between IGC and provider has matured over time (I have in the past been critical of the IGC for not showing the granularity and I’m very impressed that even in the most detailed sections, the report stays focussed on explaining what things mean in a way that savers can understand.
There are areas that I would like to see more engagement with. Royal London has taken in a huge amount of new money from DB transfers (as evidenced in its reports). I have no issue with this, this is an adviser matter. However, most of the new money has not gone into Royal London’s workplace pensions but into its SIPP and I wonder whether this is always in the best interests of customers who typically pay more for self-investment .
I’d like the IGC to look into this next year and push hard to Royal London to understand what drives the decision on which product to transfer into and whether the workplace pensions that Royal London offer could be better used.
If ,as seems likely, the scope of IGCs is extended to deal with non-workplace pensions and into the drawdown phase of a personal pension , then this is an area where the Royal London IGC could prove really useful.
Although it means giving Royal London three greens for this report , I am going to give the IGC a green for being effective.
There can be no better barometer of an insurer’s commitment to workplace pensions than its IGC report.
This report does Royal London credit (though it shouldn’t shout its sponsor’s praises so loud).
It’s bursting with good information which advisers, employers and savers can get stuck into.
I am really pleased that in his first year as Chair, I can give Peter Dorland’s report a clean bill of health and congratulate him on a first rate Chair’s Statement.