2019/20 – a battle won

Prudential’s is the last IGC to publish its Chair report this year and I suspect the report we get is rather different than the report planned earlier in the year.

Chair Lawrence Churchill tells us

During the year Prudential proposed an increase in charges for around half of Members. After the IGC raised its concerns with both Prudential’s Board and the Financial Conduct Authority, I’m pleased to report that Prudential has decided not to go ahead with the increases for the moment. This is good news for Members.

We learn later in the report that

The big event of the year which has dominated IGC’s time and attention was Prudential’s proposal to increase charges. There was intense discussion with Management, Prudential’s Board and with the Financial Conduct Authority on possible communication to Employers and Members. However, in March 2020 Prudential decided not to proceed.

And Churchill signs off his five year stint as Chair with sober advice.

Prudential has indicated that it may review it’s (sic) position on increasing charges in the future. If they propose an increase, Employers and Members will need to be vigilant about the reduced pension and the impact on Value for Money

It is a mark of just how effective this IGC has been over the past five years that they have won this battle. But I suspect the climb-down by the Prudential owes  much to not wanting to put up prices at the onset of COVID-19.

It is hard to think Prudential’s IGC will be able to replace its chair with a better. The standard his reports have set in terms of tone . brevity and the logic of their VFM assessments, have raised the bar for others. Thanks to Laurence Churchill.

Tone and structure

The report is only 11 pages long (with a further 12 pages of appendices). Although the ICG is clearly dominated by Churchill, the report continues its practice of  giving  equal voice to each of the members. Tellingly, the news of the IGC’s victory on charges is given to the Prudential nominated member to deliver, a use of reporting structure to demonstrate the distance between IGC and provider- even where conflicts might occur.

The style is positive but not effusive and the language plain and direct. Not everything quite works (the odd purpling out of board members in introductions), but you can hear individual voices of board members which makes the report much more engaging.

In previous reports i’d been critical of “fluffy” prose, specifically with Lesley Alexander and I’m pleased to see that all reports this year are precise, concise and incisive. Take this

In common with the rest of the industry, we have not seen any breakthrough on the quality of customer engagement. Indeed the FCA reported earlier in the year that, across the industry, only 49% of Members read their annual benefit statements.

This clarity of expression is encouraging, especially if the IGC can find ways to better engage Prudential’s savers with their savings.

And throughout, there is a sense that the report is talking to you, albeit from a considerable distance

No concerns have arisen to date for IGC and, in line with the new responsibilities, a fuller section will be included in next year’s IGC report.

Meanwhile have a read of the published ESG and Stewardship reports.

Daniels and Kefting’s M&G Stewardship is indeed worth reading and I did so because of the Margaret Kerrigan’s informal but authoritative invitation.

In tone and structure, this is a very good report and I have no problem giving it a green rating.

Is the IGC effective?

We will not know if the charges backdown is a stay of execution or whether the Prudential will back down following the pandemic. The new Chair will be important in this but the existing committee have clearly done the policyholders a good turn and they are many in number.

Prudential don’t appear to be investing in engagement as the IGC would like and Lesley Alexander is on the case.

Their administration is creaking and Jennifer Owens  is on the case

IGC has not seen a clear pattern of service performance from the new system of reporting. Throughout the year, we received service level reports on the old basis. These showed continual underperformance on call handling and one or two periods of poor service on claims caused by computer system problems.

John Nestor is picking up in spikes in transaction costs on internally managed funds and reporting outliers where costs on self-select exceed 30bps – a clear sign that VFM is in danger.

Overall I was happy that each member of the IGC was doing their job, that the team was working as a whole, effectively and to the benefit of policyholders. If only all IGC reports could communicate as effectively, how effectively they worked. I give them a green.

Value for Money assessment

Tellingly, the report stops short of validating the Prudential as giving value for money. This is most unusual, I do not read a statement to the contrary but I suspect that there may have been escalations to the FCA during the year and Laurence Churchill does not sign off with any great celebration of a job done.

Prudential’s proposal to increase its charges for around half of Members, often substantially, served as a wake-up call

Uniquely, Prudential’s Value for Money Assessment is based on outcomes and – as Appendix 4 shows, there is a clear methodology which is transparent to a degree of granularity i haven’t seen in a report before.

The approach being adopted to rate investment pathways next year looks exemplary. I note that no benchmarks are in place on ESG and the engagement benchmarks continue to look woolly .

On the main benchmark, delivery against outcome targets, the Pru continued to deliver, albeit in a storming year for all asset classes (except cash). It will be interesting to see what the CPI+3% outcomes benchmark looks like for 2020 and what COVID-19 does for three and five year assessments.

From day one, Prudential got their VFM assessment right and though they have had to slightly dilute the outcomes based approach, it is still the most effective and consistent benchmark.

I give it a green again, meaning that the Prudential is the only one of the major reports that gets a clear round. Despite being short, this is an excellent report. Indeed its brevity is one of its many virtues. Farewell Laurence Churchill, you have set standards.

Lawrence Churchill CBE