Cushon’s positive approach to valuing our money

After two days in Edinburgh it was a relief to watch a debate on the value of pension saving that actually focussed on saving for pensions! Well done Cushon for sponsoring and for getting Steve Webb and Ros Altman talking on the same platform and well done to Juliana Oladipo of EY (who’s precisely the kind of pension manager I’d want to have).

Any debate about what can help people work out if they are getting value for money is welcome. This was a lot more consumer focussed than many. If you follow the blog you may conclude that left to the industry, VFM will continue to be whatever we want it to be!

Why this session -now?

The debate was sparked by the publication of the FCA and TPRs response to feedback on their recent VFM proposals, a subject that I don’t suspect many pension professionals are taking very seriously.

Each of the four participants came to the 60 minute conversation with a different agenda

Ben Pollard’s clearly concerned about  how workplace pensions (and Cushon) can  compete for people’s eyeballs in the cut and thrust of google.

Juliana Oladipo–  concern is about “meeting expectations –  she sees VFM as difficult as everyone has different values – it’s hard  putting members at the heart of the debate

Sir Steve Webb was keen to meet people’s expectation but is making the point- people have an expectation of a pension – and is wondering how  we measure outcomes in terms of that expectation.

Ros Altmann  is keen on getting rid of the middlemen – people choosing pensions on behalf of others ~(including employers). She sees VFM as about  – increasing contributions – financial education  and the  individualisation of savings. For her it’s all  about improving freedom of choice. She’s looking for more guidance – VFM from a  scheme comes from the scheme looking after members through their life.

This shows that there is little congruity between what people see VFM as being about, let alone what it is achieving, there is little here to suggest that people are following the cost/performance and service agenda of TPR and FCA.


Measuring VFM

When it comes to measuring VFM, there is no greater conformity of views.

Steve Webb points out early on that  all we can really measure is the past. ~Uncomfortable as using past performance as a measure of value – it is the place where we start to measure value

Ros makes it clear that it’s not just about charges. She argues there needs to be league tables – but these aren’t league tables of defaults. She doesn’t think that lifestyle and TDFs are appropriate for most people. Customer service ratings, range of options, clarity of communications are the thing she’d rate and they’d form the league tables she’s interested in

Ben Pollard approaches the issue of performance with his actuarial and fintech hats on (a tough balancing act!).

He is interested in rules about use of stochastic projections to create league tables using forward looking returns. This allows for  “good case and bad case” scenarios which take into account the amount of risk in strategies (this is an approach I have a lot of time for. He is interested in incorporating   all the complexities of private equity, impact investing and good governance to be distilled into a set of numbers that give a forward looking view of what’s the most likely return.

Increasingly we will turn to sites like MaPs’ MoneyHelper to get simple metrics that can let us do our shopping around,

He wants to go to MoneySupermarket and compare the return he’s likely to get from a fund choice with  what he’d get on  cash – this is inching towards using past performance to make guesses about the future. Informed guesses are the best guesses when there’s nothing better.

Ben is also keen on the “super measurability” of customer experience in the  tech world – which he believes can simplify to league tables the customer experience . He calls this a  “super fruitful line of inquiry”. ~”Super” is a word that features big in Ben’s vocab.

Listening to Ben, Steve Webb ponders on what can people do with this information. He then comes out with a radical suggestion – calling out the inertia of employers and suggesting the creation of  mandatory re-tendering of schemes. He sounds as if he is thinking on his feet as he suggest this could be a three year exercise to create a secondary market in workplace pensions. (this is clearly a use for scheme based  VFM metrics)

Julianna reckons that big providers have a long way to go to enabling people with tech. She sees a  need to make a big shift towards putting information in people’s hands. There is value in giving people an idea of how providers have performed.

And Ros points to the  proliferation of net pay arrangements an example of how little employers have cared about the member. Low-earners have missed out, providers like Smart and NOW have promised change but none has arrived, she calls the net-pay issue an example of how things shouldn’t be done (to Cushon’s embarrassment).

So why the emphasis on costs?

Julianna  sees it as difficult not to focus on costs – “it’s the one thing you can show to your workforce”. She recognises there is a challenge there and it’s a race to the bottom. And  if the only thing people can look at is “how much is this going to cost me”, how do you talk about outcomes?

For Steve the question is how a provider’s help people measure what they are going to get in retirement – especially as the  provider doesn’t know what else people have got. This is where the dashboard comes in. Perhaps the value for money measure will be the way people choose which pots to combine to which.

But Steve returns to his earlier brainwave. He sees that  employer isn’t incentivised to review their initial choice but now he’s worried about stranded pots if employers move scheme. Steve wants  to stir up the market wanting a more competitive spirit in the market with his politicians hat, but he wants to make sure that schemes consolidating , don’t do so at the member’s expense

Ben continues this theme – “we need competition but competition about the right things“.

This seems to be a competition to tell the best news story! He tells us Cushon want engagement,  fluttering people with confetti for engaging with pensions.  And then he adds “What we don’t do is to tell people they are going to retire in squalor”. Negative advertising doesn’t sell products – Cushon want value for money metrics to sell products – they want them to tell good stories, I wonder if the consumer believes that everything in the garden is always rosy

Ros – picks up on the harm done by negative messaging. Savers are told “You are never doing enough. Providers are always forcing people to give people more money. Value for money could be about pension providers  working with employers to produce positive messaging. “You hear positive messages for Mars Bars but not for pensions”. I hear all this but I’m not sure that Martin Lewis is always providing positive messaging, he get engagement by mixing good and bad news stories. Let’s be clear, some people aren’t getting value for money from their pot management.

Julianna now returns to her earlier theme. Most members don’t have the confidence to do things. How do we build member confidence to value the good things from the bad things? Hers is a more straightforward approach telling people how things are. I agree –  people are not going to engage with out the confidence that they can get answers on what makes for good and bad.

There are other views from the audience.

Someone from the audience asks if the provider’s facilitating the payment for financial advice is a component of value for money. Another example of VFM being whatever you want it to be.

Steve is quick to knock this back “For most people financial affairs are broadly simple – prefer nudges and so on. It’s expensive but not needed. He points out that  the big behavioural nudge of auto-enrolment happened without financial advice.

And for Ben Pollard , it’s not trying to shoehorn workplace pensions into the financial advisory space. He sees what he is doing as a number of  “embarrassingly simple innovations”, questions received wisdom as to why  we need forms to increase a pension.

It is clear that the customer experience is part of the value proposision and he concluds with a powerful question

“Instead of frightening people into feeling very are retiring in squalor – why don’t we make it easy for people to do something about it”

Whatever your view about what constitutes value., it is clearly a much less well defined term than what we understand by “money”. We need more debates like this , but ultimately we need to get to a consensus around- not what industry experts see as VFM. but what the public does.






About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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