Standard Life has published its 2019-20 Chair Statement.  

Standard Life are now part of the Phoenix Group who have rationalised their two  IGC committees removing the Standard Life IGC personnel and replacing them with Phoenix’s established team, under the Chairmanship of David Hare.

Phoenix has already subsumed the Abbey Life IGC and is about to welcome a third IGC to its fold in ReAssure. Look forward to further consolidation as it looks unlikely that I will be reviewing three reports again next year! Perhaps an indication of the direction of travel is in the mailing address if you want to comment on this Standard Life report -igc@thephoenixgroup.com

Necessarily the Standard Life and Phoenix reports often replicate each other, certainly in terms of tone and structure, but also in the value for money methodology and in much of the work the IGCs plan to do in 2020-21.

IGC Chair – David Hare

Tone and structure

The IGC Chair Statements this year are being published in the midst of the Coronavirus pandemic. The gravity of the situation is recognised in the report both in the member summary and Chair’s introduction.

The Standard Life IGC statement is split between the bit the IGC think members should read and the much longer bit they might like to read, if interested. The bit you really should read is on the link at the top of this article

You have to click through to read the full 2020 Annual Report. using this link to read the detail. I found this approach worked well and meant that I could see the bare bones of the statement  on a single screen with multiple expanding buttons taking me where I wanted to go. This is a big advance.

In his  Chair’s introduction, David Hare focusses on the issue of “getting read” and focusses on the FCA’s new requirement on IGCs to monitor member communications

Hare asks

.. is a document fit for purpose if it is not sufficiently engaging as to encourage readership by a significant proportion of scheme members, even if it contains all the right information?

I am pleased  that Standard Life’s IGC’s Chair’s statement encouraged me to read it but at nearly 80 pages it was too long (especially the member engagement section).

Nonetheless, the report was a rigorous read, often challenging and though-provoking. In terms of tone and structure I was impressed and give it a green – being the best accolade I can give it.

Effectiveness

The acid test of a workplace pension is how it treats its customers – all its customers. I have had cause to call out Legal and General for failing its vulnerable customers , the same cannot be said of Standard Life. They continue to offer a level of support to everyone – both through well organised web-pages and through a live telephone help-line.

We appreciate your patience during these exceptional times. We’re following government advice on home working to look after our people so they can continue to give you the best possible service.

Our priority is to ensure we provide a telephony service to our more vulnerable customers and therefore if your need is not essential, we would appreciate it if you would contact us via the online enquiry form.

This is reasonable and validates the IGC’s statement that

We have been very impressed at the speed of planning and implementation of new operational processes, in order that all possible steps are taken to ensure at least the most important needs of customers (particularly the payment of benefits) can be met in even very extreme scenarios of potential Covid-19 impact.

Throughout this report there is evidence of the effectiveness of the Standard IGC committee. It is critical of much it finds.

There are lower levels of satisfaction from customers that they have the information they need to make decisions on their pension and investments.

• The IGC will continue to monitor Standard Life’s position on the 117 plans that have death in service benefit, including its review of the level of charges for this benefit.

• The IGC has been disappointed at the time it has taken in order to give us a full picture of this important area (transaction costs).

• IGC disappointment at lack of visibility of how ESG considerations impact in-scope members’ funds, despite repeated requests from the IGC

Performance reporting ; Standard Life were given a clean bill of health from Redington (the IGC’s investment consultants). This was principally because most of the Standard Life funds offered took out their exposure to GARS. GARS is an absolute return fund that found that in taking diverse risks off the table, it missed the chance to capture market growth through the long bull run since the 2008 crash. It would be sad if the protection GARS was designed to give people in falling markets, had been removed at the point when markets fell.

My concern for an over-reliance on the kind of metrics offered by consultants is they tend to be reactive and can precipitate the kind of behaviours that , were they found among amateur investors, would be considered dumb.

in short I find the conclusion drawn is unrealistic

This year’s matrix assessment produced a score of 38 out of 45 (84%) against last year’s score of 24 out of 36, which is 67%.

The performance reporting and analysis cannot change that much in a year. I fear that the value assessment is as volatile as the markets

The most effective way of benchmarking that, is to see what internal rates of return were achieved on individual pots. I will return to this theme in the next section.

Customer Service; It is good to see the IGC pushing for the publication of the results of internal service levels rather than the antiquated public ones. Pressure on these levels is coming from customers (I suspect employers) and the IGC is right to respond to it.

I have to admit that having the lengthy analysis of Standard Life’s benchmarking surveys , I am none the wiser as to whether Standard Life are doing better or worse than in years gone by , either in relative or absolute terms.

Customer engagement: the report spends over 10 pages labouring over Standard Life’s various engagement initiatives, concluding that Standard could do better but that things were moving in the right direction. Standard Life is pioneering advice at retirement through its network of advisers. The danger of this is that in the hurry to get the messages it wants to get to their customers, it forgets to give customers the information it wants from Standard Life. The report makes this point very well.

“although statistics of customer satisfaction with communications are strong, there are lower levels of satisfaction from customers regarding the information they need to make decisions on their pension and investments”

Costs and charges; the analysis of the 544 unit linked funds offered by Standard Life suggests that Standard find getting the data from fund managers , easier than Phoenix (for whom there are still significant gaps in reporting. This suggests that fund managers don’t see all platform managers as equal (something Phoenix may want to think about as it continues to grow. There is little to say about the work Standard and the IGC has done but to praise it.

Standard Life and the Pensions Dashboard

It’s surprising, considering the amount of the report devoted to engagement, that the IGC has not made more of the Government’s initiative to launch a pensions dashboard. With its emphasis on being the open bit of the Phoenix empire, Standard Life has more to gain from people using a dashboard to find and aggregate pensions.

Perhaps in 2020-2021, the IGC could look at this in more detail

Summing up the effectiveness of the Standard Life IGC in 2019- 2020, I give them a green, my highest level of scoring. This is an IGC that takes it very seriously.

Value for money

Here is the VFM assessment – the 93% score compares to an 89% score for Phoenix

The only area where the scoring differed was in costs and charges (Where Phoenix scored a 12 rather than 16.

I find this surprising as Standard Life has a quite different investment proposition and operates customer service from a different unit. While I can see it is possible that the management culture and risk and governance frameworks of both organisations have been merged, I think this is unlikely. I have visited the offices of Standard and Phoenix recently and sense that in many ways, they are quite different.

I suspect that there is a spurious accuracy about the results of the balanced scorecard and that the calibration is wrong. Can we see both propositions as approximately top decile? If there is any kind of benchmarking going on, then what does bad look like?

I was pleased to read that the Standard Life are prepared to change their ways of measuring value for money. This is happening already with the qualitative approach previously being adopted by Phoenix being supplemented by the more quantitative approach pioneered by former Standard Life Chair Rene Poisson.

But I am not sure that the current VFM assessment carried out by Phoenix or Standard Life properly passes Hare’s own sniff test.

…is a document fit for purpose if it is not sufficiently engaging as to encourage readership by a significant proportion of scheme members, even if it contains all the right information?

When talking of the IGC’s aims, Hare tells us

We are also keen to do what we can to help increase the level of engagement between customers and their pension

I need no second invitation. Savers want to know how their money has done, they want to know how it has done as their rate of return and they want to know how it has done relative to other people.

While Hare is keen to benchmark other areas of Standard Life’s  delivery by way of participation in industry groups, the report does not evidence any work on benchmarking the experienced returns of savers, nor how these returns compare with other groups of savers (even Phoenix).

Until I see evidence of outcomes based testing , I will continue to criticise the VFM assessment of Standard Life as failing to engage customers with their pension and the report for containing all the right information but not getting read.

I give the report an amber for its value for money assessment. Notwithstanding this mediocre rating, I am pleased to see the strong words the report contains for fund managers taking two years to provide the numbers for the cost and charges assessment.

I am also pleased to see that the application of ESG principles makes it into the value for money assessment. Standard have clearly got a way to go on this and the relatively low score holds back the whole score from approaching perfection

No doubt David Hare will be pointing this out to Standard’s management. There is much that a funds platform can do to engage members in the ESG management of underlying funds . I hope that David Hare will make sure that Standard Life incorporates market developments which enable transparent viewing of the underlying investments within funds and encourage member engagement and participation in the enforcement of ESG at stock level.

Again I’d hope to see Standard Life’s obsession with member engagement driving innovation, there are clear links between engagement and improved contribution levels.