Fidelity’s IGC report for 2021 is rather less low-key than this video from IGC Chair Kim Nash would suggest.
While there is a lot of talk of challenging, Fidelity’s IGC has been remarkably stable both in its compositions and its reports and this is reassuring to the employers on whom Fidelity are dependent.
Increasingly the battle for supremacy among workplace providers will focus on their capacity to retain existing relationships and win new employers. Fidelity has both a master trust and a GPP, both of which are independently governed with Kim Nash as chair.
While Fidelity’s IGC reports are not advertisements for their products, they are increasingly talking to their participating employers. The report – when talking of member education – acknowledges that it is the employer who is the primary partner in improving contribution levels.
The theme of talking to the members is prevalent throughout the report and Nash is keen for Fidelity to get on the front foot and sing its own praises. Here is Nash on the Fidelity default fund- Future Wise.
Our one criticism of Fidelity when it comes
to FutureWise is that we would like the
company to communicate more with
members about this strategy, so they
feel confident they are investing in a
default that is well designed, well run and
To the expert, this chart suggests that Future Wise has delivered consistently for all age groups within a workplace pension. But the constraints in reporting are obvious, this chart does not include the impact of ongoing contributions, charges and is only “partially based on the performance of the equity funds within the FutureWise Equity Fund”.
Tantalizingly, the small print talks of “personalized returns for their investments” through plan-viewer. But where is there an external benchmark by which savers can judge whether these returns are good or bad.
The IGC go on to demand better
We would like Fidelity to
describe the benefits in a more tangible
and positive way, so members can have
more confidence in a strategy where
the majority are invested. We hope this
will encourage members to consider it
actively, as well as it being the default for
those who don’t want to choose their own
And the criticism of Fidelity for falling back on the jargon that besets compliance is in the context of Kim Nash’s clear and precise prose style
We have raised a specific concern to
Fidelity about the way its communications
are written, as we would like to see them
move to using plain English and accessible
There is indeed much that Fidelity can learn from its fiduciaries.
Value for Money assessment
The IGC report comes with a separate document that outlines the framework within which the value for money assessment is made.
As regards the costs and charges, Fidelity has been exemplary in its disclosure – providing a public website which discloses the costs and charges of all the employer schemes within its workplace pension.
Members can access this site but so too can advisers and other employers keen to see what “good looks like”.
But for all the value of reporting on costs and charges, the ultimate value of an individual’s pension pot is down to the returns achieved net of charges on all contributions.
I am pleased to see that the transaction costs within FutureWise have now been slimmed down. I hope that the reduction in these costs from the disclosed 0.3-0.4% in previous reports to an amount 1/1oth of that is sustainable. Anyone who has tried slimming knows it is as hard to keep the weight from coming back on.
But – for all the bravado about the value of FutureWise, there is insufficient evidence within the IGC report for the reader to take an independent view. The research I have done on behalf of individual and corporate Fidelity clients suggests Fidelity have an excellent fund so I would urge Kim Nash in future reports to focus on comparative returns as much as comparative charges.
I am not as impressed as the IGC, that Fidelity brought in investment pathways in advance of the FCA’s deadline. A progressive insurer like Fidelity with sophisticated purchasers among their participating employers is competing in a different space from other workplace pensions.
Fidelity plans tend to be more mature and to receive higher contributions than providers relying on auto-enrolment and its minimum compliant contribution levels.
Its peer group should be the SIPP platforms of Hargreaves Lansdown , SJP, AJ Bell and Pension Bee. The IGC are right to call Fidelity for not creating the joined up suite of self-service tools to be found elsewhere in this peer group. It is in Fidelity’s interest to ensure it maintains money to and through retirement and it’s hard to understand why more has not been done (in advance of FCA requirements).
I have always admired Kim Nash’s style and precision in her reporting. This is another well-written report and the accompanying member report and VFM framework are also first-rate. I give the report a green for its tone and style.
The IGC seems to have done a lot with Fidelity over the early months of the pandemic and there is evidence in this report that the deficiencies of Fidelity’s proposition in the past (such as the high transaction costs) have been put right. Disclosures at employer scheme level are excellent. This looks like a year when the IGC can prove it has had impact and I give the report a green for its effectiveness.
My reservation with the report is that while it urges Fidelity to promote FutureWise, it gives us little evidence about how this should happen. Similarly, its rush to applaud Fidelity on its investment pathways does not appear to be backed up by much evidence that the investment pathways are working (or even being used). I think the VFM assessment is light on detailed evidence, though Fidelity are clearly heading in the right direction and I can only give it an amber for its VFM assessment.