Thank to Hymans Robertson, for a series of excellent sessions on the benchmarking of workplace pensions value for money propositions. The sessions have been led by Michael and Shabna.
The consultancy is looking to encourage good practice amongst not just master trustees but also the trustees of occupational schemes that might be looking to transfer all or part of their membership into a multi-employer scheme (a master trust).
The sessions have given various master trusts a chance to showcase how they ensure they are giving current members value for money and to explain their process to make sure this continues. Necessarily, this “shop window” has proved popular and I’ve enjoyed listening to and occasionally asking questions of the master trust representatives.
Yesterday, we heard from Mercer , SEI and People’s Pension and as People’s left us with some unusually detailed slides, I thought to look in detail at what Sam Steadman had to say. I was impressed.
Firstly, I like this slide and the thinking behind it.
The value proposition has switched from being focused on the employer to the member. Employers were attracted to master trusts like People’s Pension because they accepted them without underwriting the value of what the employer could bring and in many cases , they provided setting up the documentation and payroll participation at little or no cost.
But People’s are now having to justify their value proposition in terms of what it brings the member. Their methodology is to ask what the charges “members take on” are buying them in terms of People’s as an organization, what the Scheme does for them, how their money is invested and what support they get from People’s when members need it.
This member orientated approach is infact very simple. For those who have purchased People’s service (employers). it provides a simple way of explaining to staff why they remain with People’s or why they might choose to move away.
This slide take us through the member’s life in the scheme and envisages most members staying with People’s from enrolment to death. Without commitment to providing these services, the vision includes the capacity to integrate or even provide pension finding and the use of a pension dashboard, it talks of providing guidance at retirement and hints at offering ways to share the various risks when spending the accumulated pot.
This simple approach can be supported by a range of metrics which I hope that People’s Pension will share, not just with Hymans Robertson, but with the million or so employers who do not have access to the high quality advice of such a consultancy.
Understanding what people are getting today needs to be complimented by a view of what they will get tomorrow and somebody needs to give smaller employers some help here
There is a need for small employers to have independent assessment of the value propositions and for that information to be shared in the market. That appears to be what Hymans Robertson are looking to do.
And of all the pitches I have seen in the sessions they have been running, the People’s Pension is the one that most clearly articulates the buying criteria of their customers (employers).
The task for Government , through its twin agencies, the FCA and tPR , is to enable those who make purchasing decisions on behalf of members (employers) and for members themselves (where they are looking to combine pots), to be given a simple understanding of the “value propositions” of the options open to them.
Employers should be able to benchmark the propositions of all workplace pensions that offer free access (as People’s Pension does) to participation in their schemes. Providers who offer limited access should be advertised as such, while schemes such as Pension Bee, which only offer access to individual savers, should be excluded from employer searches.
Currently support for employers reviewing their decisions is limited to those employee benefit consultancies offering a benchmarking service. But the Government is considering making information more generally available, as it is in Australia. Guy Opperman is openly discussing the use of league tables which employers could consult to compare ratings on costs and charges, investment performance and quality of services.
I mentioned this at yesterday’s meeting. The reaction of those on Hymans’ panel was that in terms of transparency, league tables work; however it was generally thought that league tables dumbed down complex decisions and short-circuited decision making.
This may be the case, but I suspect that the gap between general practice (no review) and best practice (the review you will get from Hymans and other similar firms) is too wide to expect most employers to bridge it. Most employers need simpler metrics which rate the various aspects of the schemes they are in and allow comparisons to be made using a balanced scorecard.
Maybe it is time for Steve Goddard , who has taken the helm at the Pensions Playpen, to start that process and reinvent that organization’s “choose a pension” service. Maybe firms like Hymans can share some of their research to reach a wider audience! Maybe the Government can make this happen by mandating the publication of simple metrics through league tables – it has happened before!!!