I really admire organisations that are prepared to take a chance and test their workplace pensions for value for money. SUEZ is one such organisation. Michelle Sutton, SUEZ Head of pensions and reward talks here about how since 2004 her workplace pension provider has improved her staff’s savings by nearly 10% from the benchmark.
Based on our bnchmark, SUEZ’s savers would be £84.25m but BlackRock and now Aegon have created £8.65m added value through their workplace pension, taking total savings to £92.9m
In AgeWage language, that amounts to a stunning score of 88 out of a potential 100.
Creating value for money
Talking with Michelle it is clear there is no secret sauce that SUEZ dripped into their workplace pensions. They chose well in 2002 and stuck with a winning solution for 18 years.
Blackrock and then Aegon have delivered a small but significant improvement in returns which over time has amounted to significantly bigger pots for the vast majority of staff.
As is usual with workplace pensions, most staff use a default arrangement , leading to a significant clustering of returns in the
While it might be concerning to see nearly 300 staff with negative returns, when we look at returns against the average return for those individual contributions, the numbers getting left behind are very small.
The report gives SUEZ and Aegon the opportunity to investigate where those small number of staff who’s pots scored less than 50 were losing out.
Were they victims of self-selecting the wrong funds?
Or were they unlucky in the timing of their contributions?
Or were their errors in recording their data?
SUEZ are now in the position to exercise real governance where it matters.
in examining the data of 11,733 members, we could only find 237 “odd” scores. We call odd scores “outliers” and they can happen for all kinds or reason, mostly benign. Where they may are not benign is when a member’s pots has been diminished through a contribution being recorded and not made or made at the wrong level. Instances of this are rare in this data set, suggesting (to use the phrase favored by the FCA) staff and SUEZ have got a high quality of service.
Consistency across cohorts
Much is made of inter-generational inequalities in pensions, in SUEZ’ case the returns from different cohorts of joiners are consistent.
Small schemes can add value
Experts will notice that at £92.9m in assets, SUEZ would (were it an occupational scheme and not part of a GPP) be considered a small scheme that might have to wind up if it could not prove it was creating value for its savers money.
Whether SUEZ looks at its current (active) staff, its former (inactive) staff or the former staff who have continued to save into the plan (active leavers), SUEZ has sponsored an arrangement which has and continues to add value.
For those in this scheme, the value will be where it matters, in their back pockets.
SUEZ should have no difficulty letting their scheme members see their data on the pensions dashboard and they now have the pleasant job of communicating this good news to their staff.
So what of Schemes that fare less well
The intrepid decision of SUEZ to use an AgeWage value assessment could have resulted in the organisation receiving a score for the aggregate of members below 50. Clearly messaging is more difficult in such circumstances, especially if the analysis also throws up poor quality of data indicating a poor service from the provider.
We have explored data sets from which these negative conclusions have had to be drawn. What then?
Where there is consistent under-performance and where data is poorly recorded, remedial action needs to be taken. To use the vernacular the providers of services to that scheme need to shape up or shape out. Questions may also have to be asked about the governance and regulatory failings if the poor performance has continued over time.
SUEZ took the risk of finding these negative messages. They were prepared to deal with them, SUEZ is to be admired not just for getting a good score as for risking finding it had had a bad one.
While not everybody can be top of the table, those who have winning schemes have a right to celebrate and indeed share their information. I am writing this blog to celebrate good practice and commend SUEZ’ provider – BlackRock and then Aegon.
Such good news stories are not uncommon in workplace pensions. Due to the diligence of those who choose and run these schemes, members are more likely to get good outcomes and a high quality of service than an organisation that does not prioritize pensions.
If you have a scheme with more than 500 savers in it (including those who have left your employ) , you can choose to have an AgeWage value assessment. You can kick this off by mailing me ( firstname.lastname@example.org). If you are interested in introducing your clients to this way of testing VFM, then I would be equally pleased to speak with you. And if you are reading this as a regulator, we would be more than happy to share with you , how our simple system of bench marking IRRs , could take away the complexity of VFM assessments and create a common definition of value for money.
In the meantime, let’s celebrate a company and its staff, getting pensions right!