The value you get for your pension money

Independent help for all pension savers

I started yesterday in the swanky new film studio under the FT’s Bracken House. It had to be built on stilts and sound and vibration sealed as the district line runs right below it. As you sit on your sofa, cameras wheel past you driven by an unseen hand.

All this to explain to subscribers to FT Ignite , why IGCs and DC Trustees do matter and that they can make a difference. I look forward to sharing whatever comes out of the session- though I may be constrained. My key point was that IGCs and Trustees are responsible for protecting members from harm (however inflicted).

We talked of Fidelity’s default workplace pension fund that has  transaction charges that more than double the AMC. We talked about Woodford and the role of the Hargreaves Lansdown IGC in protecting workplace pension savers.

And we talked about value for money scoring for pension savers.

From zero to hero – the Hargreaves Lansdown IGC report


Trouble at stables

Hercules 2

I wasn’t anticipating continuing this discussion later in the day but with typical candour, Richard Butcher shared with us his frustration with having to make value for money disclosures.

We know that Richard doesn’t think cost disclosure worthwhile, from the laissez-faire attitude he adopted in his IGC Chair’s statement for Old Mutual. The pendulum has swung and 70 pages of disclosure later, Richard may feel he’s proved his own point.

Legal & General threw the kitchen sink at the problem in their 2019 IGC Chair statement. Where Trustees or workplace pension provider offer 200+ choices for members, they necessarily burden those tasked with fund governance with 200 times the data and 200 times the trouble.

As most workplace pensions are unadvised, the IGC or Trustee is the only independent source of expertise the policyholder/member has.

The message to those managing the fund platforms must be simple. If you want to offer every fund under the sun, there is a price to pay for it in extra governance and that means paying Richard Butcher and others to clean the Augean Stables

Hercules


Should we ban fund platforms from the workplace?

It’s easy to argue that we should simply ban fund platforms from workplace pensions and go back to a small but well governed range of core funds with an intensively governed default. This would be regressive,

Hargreaves Lansdown’s workplace pension platform (Corporate Vantage) is well regarded by employers that use it. It would be interesting to know how many policyholders accessed the Woodford World Equity Fund through the corporate plan but (judging by policyholder behaviour elsewhere) I doubt many. In any case, pension savers have less need of liquidity than most.

The IGC may want to have a conversation with Hargreaves Lansdown about red flags, and if they can’t get assurances that HL is managing the risks on the platform, then the IGC should be thinking very carefully about what funds to expose vulnerable policyholders to.

This is a question that the FCA may well be addressing as part of its IGC review which is kicking off this summer. I do not think that we should be throwing the baby out with the bathwater but I do think that employers who select a spectacular fund platform for a workplace pension, need to justify that decision. IGCs have an important role to play in discussions with employers who have not taken advice on their choice of workplace pension and are offering wider fund choice.


Why RAG is just bull!

I cannot agree with Richard Butcher’s assertion that members can be given a series of traffic lights based on the Trustee or IGC’s opinion.

 

I am with Ian McQuade – people need to know the value for their money, not a pronouncement from Olympus!

While Richard Butcher’s approach ticks all the boxes for the provider, it offers the saver nothing but “save more”.

People need to know what they are paying for and what they are getting for it. In the crudest sense, they need the equivalent of a till receipt.


A better way

Ruston Smith and I see eye to eye on most things, but especially on the need for simple statements that policyholders and members can read, digest and act on.

The Ruston Smith simplified pension statement, co-designed by Quietroom, shows what can be done on a single sheet of paper.

Ironically it is currently banned from showing the cost of pension management in pounds shillings and pence terms by (amongst others) the FCA. Apparently telling people the price of what they’ve bought might stop them buying again.

Ruston can’t provide a till receipt and instead has to pack the statement with words. The two pager has still a long way to go to the simplicity of a Tesco till receipt!


Simplifying pensions

We all think that value for money is very hard to explain. By “we”, I mean pensions experts. But for the ordinary person it is a very simple concept, he or she gives you the money and the amount you give them back shows your value.

agewage evolve 1

An aligned approach is the one I am pioneering at AgeWage which shows people how their money has done in a single score.

It works by analysing all the money that has gone into a pension savings account and compares that with the money is available to come out (contributions and net asset value).

Such a comparison can tell people the return or interest they’ve got on their savings. But that number is meaningless unless it can be compared with how the average person has done.

The AgeWage score is simply an expression of this comparison. By reinvesting contributions in the average fund we can compare one return against another and score people’s outcomes with a single number.


Why scoring outcomes is the way forward

This simple way of scoring outcomes is the only way I have found to give people what they crave, an accurate, un opinionated measure of how their pension saving has actually done. It is a way of giving people the value they’ve had for their money.

It is not the end of the story, infact it could be the beginning.  For many savers, it may be the only number – other than the amount in their pension pot, that seems clear vivid and real to them.

But there is in AGE an acronym that we’re adopting which allows us to take people further down the road to pension enlightenment!

A – assist- we need help with VFM

G- guide – we need a path and guide

E- equip – we need to tool-up for later age

If we can give people a proper view of their past saving and how it’s done, we can at least get some  to the next stage – a path and a guide. We might even equip them to take hard decisions on how to turn their savings into an AgeWage – an income for life.

Scoring outcomes is what Richard Butcher should be doing, not delivering a 70 page appendix to his Trustee Chair Statement.

Adopting AgeWage scoring is what Ruston Smith and Quiet room could do, to show members how the value they’ve got for their money , compares with the average.

Employing AgeWage to provide the guidance and equipment going forward, may be a next step for Trustees and IGCs, though I suspect we will have to do an awful lot of scoring before we get that far!


Finally an offer

If you’d like to have your pension pot (s) analysed by AgeWage and be given your own AgeWage score (or scores), you just need to mail me henry@agewage.com.

If you have already done this – I will be writing to you today (Weds 10th July).

We can’t promise we can get you a score as not all providers will co-operate, but we think it highly likely, given some patience from you, that we’ll get your score to you by the end of August!

Getting scores online is what we aspire to – but you have to start somewhere and this is where we start!

AgeWage evolve 2

 

 

About henry tapper

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