A simple approach

Sir David Chapman is one IGC Chair who does not promote his provider. For five years he’s been demanding an upgrade to the default fund the 80,000 or so savers in the Virgin Money stakeholder pension have been stuck in a default that hasn’t been upgraded for the best part of 25 years.

Sir David’s complaint is that it is now 5 years since the introduction of the Pension Freedoms, and thought Virgin Money and their investment manager (Aberdeen Standard) are promising an upgrade later in 2020 , the review that prompted the upgrade is now 5 years ago!

Unsurprisingly , Sir David is exasperated and makes his feelings very well known in his Chair Statement

As if it weren’t bad enough that the fund is unsuitable for saver’s needs, it’s not doing its job properly either.

Evidence of under-performance is provided.

Part of the reason for the underperformance is way above average transaction charges.

The default fund is marked with the gold background.

It is hard to see any grounds for the blockage of the IGC’s reasonable requests to have the default funds removed and replaced.

It is also difficult to understand why, once these matters were escalated to them, that the FCA did not intervene.

The restraint showed by Sir David Chapman and his IGC is remarkable, but the tone or this Statement is unmistakeable. Sir David and his committee have been badly let down. I give them green for tone and substance – no punches are pulled.

Effectiveness

On the face of it, Virgin Money’s IGC is not proving effective, but that would be grossly unfair. I have visited Sir David in VM’s Newcastle offices and he is a force to be reckoned with.

The IGC is starved of resource (clear from the spartan style with which it is presented) , but it is right to boast that it is overseeing an operation that has not fallen over because of COVID 19

And theI GC has also been successful in achieving a reduction in fund charges with effect from January 2019. Previously charges, while within the regulatory cap, were higher than many of their competitors. They are now in line with the industry average for comparable passively managed funds.

The IGC has unusually given space in its report to allow Virgin Money explain itself Virgin Money has – since midway through 2019 been 50% owned by Aberdeen Standard (ASI) and ASI are promising improvements

Our new products, services and default strategy will provide customers with a new fund range built with the expertise of our partner ASI. As stated in our commitments in relation to Environmental, Social and Governance (ESG) factors we will continue to develop our investment approach with these in mind, with a view to including further in our future development and in our stewardship of the existing funds we manage on behalf of customers.

They had better fulfil on these promises or I suspect the FCA will be hearing more. I give the report a green for its effectiveness (in the face of considerable headwinds).

Value for Money Assessment

As far as I can make out, Sir David Chapman has failed Virgin Money’s VFM assessment (the financial equivalent of an MOT).

Whatever the reasons for the delays, his policyholders are still stuck in a 1995 vintage default fund that is no longer fit for purpose.

The rest of the VFM assessment gives Virgin Money a clean bill of heath. I don’t know if Sir David Chapman is still sending paper copies of the report to policyholders (he certainly did in 2015) but I do know he is keen to get his members engaged in what he’s doing.

So my offer to him is that I’ll analyse his data for him pro bono and give him AgeWage scores which will show just how member outcomes compare with the average outcomes they’d have got since 1995 – elsewhere.

The Value for Money report isn’t that sophisticated , but it is delivered with aplomb and I give it a green score. 

With little resource, David has achieved a powerful statement and I hope he’ll take me up on my offer.

Five year review

At one point in his Chair’s Statement , Sir David Chapman looks back over the five years he’s been producing these statements

Where we have had concerns in the past I would like to think that we have made progress although all the outcomes we have sought are not yet in place. It has been frustrating at times but we have been persistent in robustly challenging management including, of course, escalating our concerns to the Financial Conduct Authority. We have not achieved as much as we would have liked in certain areas, namely regarding the Default Strategy. Even where we have achieved changes, they did not occur as quickly as we hoped.

I hope when the FCA report on IGCs later this year, they will single Virgin Money’s IGC out for the way they have stuck to it. I hope by then , his policyholders will finally have their new default.