I am  impressed by this year’s IGC report from Royal London. It has made a real effort to reach out for comparators that “customers” will find relevant when assessing the value they are getting from Royal London’s workplace pensions.

The report is clearly written with an even tone that helps me understand how my money is being managed. It gives me  the view of the IGC committee and gives me insights into other choices I might have for it. This is one of the few IGC reports I have read that recognizes that consumers have the choice to have their money managed where it pleases them. The report uses the word “customer” throughout and includes the choices of employers as customer choices.

It appears that the IGC is interacting with Royal London in a meaningful way. It has secured a promise from the insurer that legacy workplace pension default charges will be capped at 1% and the report demonstrates that the IGC were consulted with during the design and implementation of investment pathways. As importantly, the IGC have a clear plan on how to monitor performance and take up of the pathways going forward.

As with Aegon’s IGC report, I sense that the Royal London IGC have heard and listened to what the FCA has been saying and have responded positively. IGCs are supposed to challenge their providers as well as promote them and in this report I felt Peter Dorward and his team got the balance right.

A good read

Unlike the Scottish Widows report that I reviewed yesterday, this report has been properly set so it can be easily navigated from a digital device. This is important. People are not printing PDFs any more , but choosing to read from screens. It has exchanged the “executive summary” to an opening section entitled “if you only have 5 minutes, read this”. It gives the impression it is wanting to be read and I hope it will be.

The report takes us through the assessment of Royal London’s performance over the years focusing on the now familiar 8 principles of value for money.

There follows a brutal assessment of the value customers place not just on their Royal London workplace pension but on pensions in general.

No matter that every IGC report this year will claim that its provider is offering value for money, we need to focus on the key revlation that only just over a third of Royal London savers told yougov they thought they were getting value from their workplace plan.

Including these numbers in the report was a bold move and very much to be applauded

A few quibbles

The bulk of the report consists of an analysis of performance and costs and charges , looking in detail at the steps Royal London are taking to embrace ESG in their portfolios and the newly created investment pathways.

The appendices are highly technical and aimed (I suspect) at advisers who are looking for a detailed analysis of comparative returns both on a nominal and risk adjusted basis. The IGC draws on external research which it publishes without embellishment. I do not agree with all the conclusions drawn. For instance, I don’t consider the level of return in the workplace defaults  satisfactory – the IGC calls them suitable, I consider them too low.

Similarly, I don’t find this chart particularly meaningful

If your target return for someone 15 years from retirement is 1.3%, then you should be reviewing your target, not celebrating being above projections. Endorsing ludicrous assumptions in illustrations is not the IGC’s job, it is here to challenge

I am sorry that when showing the distribution of charges across plans, the IGC did not follow Aegon (and the FCA’s guidance) and show charges against the numbers of savers in each scheme.

This doesn’t help employers benchmark their scheme by membership; though this is not the only underwriting measure, it is a starting point.

Offset by some notable successes

But these are relatively minor issues, the point is that the charts show how Royal London workplace savers are faring relative to others and these include those in master trusts as well as contract based workplace pensions.

So the read is interesting to the interested saver, to interested advisers and I hope to employers who have either chosen Royal London or considering doing so.

Innovation

As well as being a good read, the report is at pains to show how things are (not how the marketers would want them to be. An unfortunate glitch on wordpress prevents me showing examples of the charts in question, but again and again the report provides us with meaningful information on performance such as the impact of the innovative profit share

and most interestingly,  a new way of helping people understand the value of their plan.

The IGC recognizes that Royal London customers are  capable of getting under the skin of their pensions

And it looks like both the IGC and Royal London itself are interested in giving these interested customers relevant information to them that goes beyond “net performance tables.

Alongside this standard table showing he performance of the portfolios which make up
the Royal London workplace default strategy…

is this statement.

These figures are presented net of a 1% annual
management charge. The actual charges
members pay varies from scheme to scheme
and is never more than 0.75% for automatic
enrolment schemes. Royal London has presented
performance on this basis to be consistent with
other external reporting. Customers are able
to see their true performance, net of the actual
charges they incur on annual statements and
most customers are also able to access this
information on Royal London’s Mobile App. The
figures also don’t include any ProfitShare that has
been added.

This is clearly unsatisfactory. If the only way that comparisons can be made is by using the wrong numbers, then the comparisons are flawed. Without actually saying so, the IGC tacitly agrees

Scrolling down a couple of pages we get to this further statement

The actual return that you will achieve on your, and
your employer’s contributions will depend not just
on what fund and strategy you are invested in,
but also on the actual charge being made on your
plan, and the dates on which your contributions
are received. To help customers understand the
performance of their own individual pension plan,
Royal London has a tool on their website that lets
you see the actual return on your plan, allowing
for all these individual considerations. This figure,
called the internal rate of return, is a useful
measure and we are exploring with Royal London
how this can be made more readily available
including any potential comparators.

This is a real step forward for individual performance reporting. Hats off to the man in purple.

In summary

I was not expecting much from Royal London whose reports in the past have been a paean of praise for the provider without much by way of external correlative.

While the report concludes that Royal London are generally giving value for money it finds areas where they aren’t and isn’t afraid to nail them

What we get is a highly readable and most interesting report that tells me what I want to know about Royal London’s workplace offering. For its consistent and gentle tone and the report’s easy navigability, I give it a green for readability.

For the way it deals with those areas where Royal London’s products are  failing (Police Mutual and other legacy products), the IGC is showing itself effective and I give it a green for that.

And for its emphasis on performance – especially on experienced performance, I give it another green.

I’m really pleased that Royal London have come up with a good report and it stands as a benchmark for others I am still to read.