Since publishing this article , LGIM has made a statement on the closure of the L&G helplines – you can read the statement here
L&G’s IGC has published its fifth report for savers ; here is the link for the 2019-20 statement.
March must have been a difficult month for Dermot Courtier , the L&G IGC.’s chair
Clearly the report wanted to say goodbye to L&G’s legacy book to ReAssure, this deal was announced in 2017 supposed to complete in 2019 and has now been put off indefinitely because of the current pandemic. There is a lot of “nearly there” about what is happening at L&G at the moment.
- The workplace pensions unit is piloting an app but this is still not generally available
- The workplace pension plan has a new default (the Future World MAF) but it’s not the default default – employers will have to make a conscious decision to adopt it.
- There are currently 10 self-select funds in special measures but we aren’t told which they are.
- The IGC undertook a benchmarking survey with other IGCs – but the results are not published.
- There is no mention of systems developments, there appear to be no plans to extend the Bravura platform to workplace pensions
- One of the IGC’s principal jobs for 2020, oversight of the introduction of the investment pathways, is no longer required by the FCA as a result of the pandemic.
The IGC statement is full of what the IGC got up to, but tells us very little about what is actually happening. L&G workplace seems to have spent another year “consolidating”.
The IGC and the current pandemic.
But L&G is now faced with a challenge
At the time of the statement , information that appears on the L&G workplace member portal in a blunt fashion
In case the print is too small – let me repeat
In these difficult times, we’re doing what we can to look after our customers and our employees. We regret that we’re unable to operate our normal helpline service and our phone lines are closed until further notice
You can reach L&G by secure message or email (though there is no mention of response times). Death and health claims can be made to Pensions.SensitiveClaims@landg.com . The implication is that other “claims” are not sensitive. The language is insensitive.
The links from this statement are helpful but it is simply not good enough for a major insurer to have no telephone helpline. Those who are not online cannot send secure messages or emails. those who have urgent needs cannot speak with an L&G member of staff. The people who need the helpline most are L&G’s most vulnerable customers.
Bearing in mind the drastic measures being put in place by L&G’s investment arm (LGIM), having no one to speak to – is not good enough.
Is this report effective and does it have the right tone?
This report has been published at a time when the suspension not just of funds, but of the member helpline is in force. Workplace pension savers might expect to have a rather stronger statement on this than that in the Chair’s statement.
Earlier in the year , L&G had some kind of an admin meltdown. It has led to the IGC marking L&G’s member support falling to 3 on its value for money assessment. That 3 became 3.5 when the admin recovered late in 2019. It is clear however that L&G is suffering sustained problems delivering an acceptable service to customers.
There is nothing in the report about the closure of the LGAS HQ at Kingswood or of recent industrial action. Previous reports have touched on these problems and it seems reasonable for the IGC to be questioning whether the workplace pension book is being properly resourced.
Those who are saving in Legal & General’s workplace pensions have every right to think that though they have low charges and good funds, they are getting a second rate service which is struggling to provide the most basic support at this time.
The report is well -written and nicely produced (perhaps too many stock images). However it really doesn’t sound an effective report and though it’s good that L&G have (at last) abolished the charges levied for us to get our money back, it only gets an amber for its tone, and an amber for its effectiveness.
Value for money assessment – successful on its terms
The report gives L&G a strong endorsement. L&G are offering “good to very good” value for money.
The measures for determining value for money are sensible and the weightings make sense in terms of the industry consensus. The IGC is operating a very balanced scorecard.
Properly, the report marks L&G down for poor member service. Surprisingly the report gives high marks for ‘member engagement” – presumably on some improvements to the member portal.
But all the evidence gathered over the years by IGCs shows that the only metrics that really matter to most savers is the amount of money in the pension pot, relative to the money that went into it.
I hope that the IGC look beyond their balanced scorecard approach in 2020 and start looking at what members have actually been getting from their plans , relative to what members get for the same money elsewhere.
For instance, the current approach of looking at investment returns is compromised by it looking only at the performance of funds. This is how we are introduced to the performance table of the various default funds that employers can choose from
The table above shows the performance of the current default funds, as at 30 September 2019. The fund performance is calculated after all fund charges. Other product charges – like the annual management charges – aren’t included
As seriously, especially for those drawing down on their fund, the performance tables don’t give any indication of the volatility of returns within the funds. So the sequential risk experienced by savers and spenders isn’t included in the report.
Experienced performance is what people want to know about – they want to know how their pots did, rather than the abstract top-down approach adopted.
Although the VFM assessment ticks all the boxes for the industry, it really doesn’t mean much to the saver. I give it an amber; it scores for its completeness on its terms, but it doesn’t score for the people who are supposed to be relying on this report – the savers.
The IGC on ESG
I asked the IGC chairs to send me their reports when they were published and Dermot, helpfully included a lot of information on the L&G ESG Hub (hub is the most overused word in financial services right now). The hub can be accessed via this link https://www.legalandgeneral.
I do think LGIM are very responsible investors, but I’ve been frustrated over the years that employers cannot access an overtly responsible default without taking advice.
Finally , L&G have adopted a green default in FutureWorld MAF , though its standout green fund – FutureWorld can only be used by employers as a default – with investment advice.
Even FutureWorld MAF is not the default default – it requires an employer to stick its neck out and take the risk of being the agent of change. I still think that L&G are not having the courage of their convictions, though I accept that other defaults – such as the pathway funds are being upgraded to reflect LGIM’s responsible ethos.
But so much more could be done than offering green funds. Software exists that allows savers to see inside the funds they invest in and even to vote on key issues relating to environmental, social and governance issues. If L&G have the courage of its convictions , it should be doing more to engage savers than simply offering an information hub.
The IGC should be concerning itself in how it can connect savers to the management of their funds.
The IGC on investment pathways
I have written on this blog about the importance of IGCs in overseeing the choices people need to take at retirement. The FCA has instructed the IGCs to oversee the implementation of investment pathways that people can follow if they don’t get advice on what to do with their money.
The idea was that the IGC would oversee these pathways – “the choice architecture”. Like most things else, the requirement has been superseded by the pandemic but the report has properly reported on its duties.
As with so much else at L&G, work needs to be accelerated to bring these choices to life, they should be communicated, like ESG, through a modern-day engagement tool.
The IGC really need to get L&G putting solutions in the palms of its savers hands. The delivery of member engagement cannot be marked a five, when – years after first being mooted – an app is still under development.
The IGC -which includes Joanne Segars and Daniel Godfrey , seems to be tootling along at L&G’s place. Now it has to deal with the pandemic and its impact on members. So far, so underwhelming.
IGCs are there to protect members and members need a lot of protection right now.
For all the resource accorded the IGC, this is a me-too report. This IGC needs to raise its game – so does L&G.