Phoenix’s 2021 IGC report

The Phoenix Group has not one, not two but three IGCs in operation. I have already reported on the IGC report for Standard Life and will also report on ReAssure’s IGC report. It’s easy to forget that historically there were IGCs for Abbey Life and Old Mutual (Quilter) whose policyholders are within the Phoenix Group. It is hard to underestimate Phoenix’s importance in managing the legacy books into which so many of us have saved.

In David Hare’s report for the Phoenix Life workplace , he sets out his philosophy before we even open the document.

Value for money is not just about what something costs. We also look at the quality of what you get in return for your pension savings and how it compares with other workplace pension schemes. We examine different aspects of your experience as a scheme member to form a complete picture of the value for money that Phoenix is providing you.

These are the terms of reference that the IGC wants to work to , sadly they are not terms that many Phoenix Life savers will recognise. The only experience many savers have is at the point of sale, when they sign their pension papers and at the point when they cash their pot in. In the meantime, “money” is what comes out of a pay packet or bank account and “value” is what appears on the annual statement that may or may not reach the saver.

“Goneaways” are a problem, the Pension Policy Institute estimated in 2019 that there is over twenty billion pounds in unclaimed pension pots, simply because pension providers cannot locate the beneficiaries of savings that happened long ago. Phoenix’s “goneaway rate improved from 12.49% to 12.09% over 2020 but that still means nearly one in eight savers are missing. As and when we get a pensions dashboard, many savers will be able to find their pensions but for now an eighth of the IGC’s readership aren’t even getting their benefit statements.

For many Phoenix Life Savers, the one thing that matters is the opportunity that arises from the pension pot.

To validate this dashboard, the IGC needs to be asking itself one important question

“would Phoenix savers be better off with their money elsewhere?”

This is how Phoenix’s IGC chair, concludes his Introduction.

This sounds defensive and there’s no doubt the FCA’s criticism of the IGCs for failing savers has hurt, but for ordinary savers, are the IGC reports what matter, or are they more interested in knowing which provider has best improved its member’s outcomes?

The VFM assessment

Having established that Phoenix has delivered value for money in all areas, the report goes on to establish what more can be done. Typically this means making sure that customers are aware of how well they are doing.

These are the same conclusions that Standard Life’s IGC came up with and I question them as I did with Standard Life.  Increasing fund choice will have a marginal impact – where the impact of ESG is felt is where the weight of money is.  The key priority for Phoenix must be to get ESG into its defaults for that is where its savers money is and will remain.

Which brings me on to the management of the investment defaults. The IGC rightly points out the difference between the best and worst performing default in 2020

I would like this to be accompanied by a way of explaining this in terms that ordinary people could refer to. For every ten thousand pounds in the Pink Fund, a saver would have earned seven hundred and seventy one pounds over the year; for every ten thousand pounds in the purple fund, a saver would have lost one thousand and ninety seven pounds.

I am assuming that both funds are default funds in their respective workplace pensions. The question the IGC is asking is whether the UK Equity fund is the best place for the saver’s money, the question the saver may be asking is how he or she ended up in a fund that has done so badly, when other funds could have given so much more value for the money.

My problem with this VFM assessment is that it is talking to regulators and to educated savers, but it should be talking to savers about the outcomes of these funds and making sure that savers who do not engage with these reports don’t get stuck in the Phoenix Pearl Pension UK Equity SHP.

On a happier note, I am pleased to see an excellent analysis of transaction costs which compresses pages of data into a simple table

I agree with the IGC that it’s the typical fund that counts and it is good to see charges coming down. I’m not sure that even a reduced transaction charge of 0.14% to 0.19% is competitive with leading workplace pensions.

Is this report effective?

And I’m disappointed to see the IGC not reporting on Annual Management Charges at employer scheme level. The IGC acknowledges the concept of the employer scheme but I’d like to see reporting of Phoenix workplace pension scheme charges at the employer level. If there is no discounting for larger employers then this is not applicable but I suspect that there are some underwitten employer schemes to report on.

The reality is that the only way members can get a discount on standard charges is through an employer negotiating them. Instead of publishing AMCs as the FCA requested (by numbers of savers within an employer’s ) scheme, the IGC publishes this table.

This table does not help employers benchmark their charges and will mean very little to savers.

This is not effective reporting from the IGC.

Readability

This report is 99 pages long, up from 67 in 2019. It makes the point that the FCA makes, that the longer the report , the less effective it is. It is not as long as the Standard Life IGC report, it is still too long. Three quarters of the report is “supporting material” , I wonder how many people have the time to read and absorb so many words and so many tables.

I am afraid that the prose used often slips into obscure language with words like “conversely” and “thus” appearing. The report is not as good as previous ones and sounds tired and frustrated.

Conclusions

This is the first time I have not been impressed by a Phoenix IGC report. David Hare and I have had correspondence throughout the year and I know he is dissatisfied with the way the relationship between IGCs and the FCA has deteriorated. But this report is not going to heal matters.

For reasons stated above I give the report an orange rating for its readability

I give the report an orange rating for its effectiveness.

I give the report an orange rating for its effectiveness