A report whose relevance is challenged
Aviva published its 2022 IGC report in September. As the picture says, it deals with the performance of Aviva’s pension savings products to the end of 2021 but does not cover the impact of the war in Ukraine, the subsequent surge in inflation or the most recent gilt crisis. I have forgotten the reason why IGC reports have been moved back this year from March to September/October but it is a shame. Consumers of Aviva’s personal pensions will have to wait another year to find what value they got from Aviva in 2022.
The title image shows a young woman , pen in hand, accessing information from her laptop. I’m an ageing man without a pen, working out how the Aviva IGC report is relevant to me and to her.
For most of the consultants active in workplace pensions, Aviva’s contract based workplace offering is now legacy. Employers are using Aviva’s and their rivals master trusts to consolidate their occupational DC plans or benchmark the workplace pension they are using to auto-enrol staff. This was not the case when the OFT reported on workplace pensions , nor when IGCs were established. The Aviva GPPs , including those actively sold by Friends Provident and other insurers within the Aviva Group, are not being promoted by Aviva and not forming part of the Requests for Proposal from the consultants who determine future choices for employers.
The challenge for IGCs is that the Group Personal Pension is fast becoming a legacy product, even though it has been Aviva’s flagship offering for the past 20 years. Without the commercial imperative of winning new business, there is a danger that saves into Aviva personal pensions will be left behind. Which is why the IGC is so important both to employers and members of Aviva’s contract-based workplace pensions.
This challenge is of course not unique to Aviva; Aegon, Phoenix Standard Life, Scottish Widows, Fidelity and Legal & General all offer master trusts as well as GPPs as workplace pensions, only Hargreaves Lansdown and Royal London compete for workplace pensions without a master trust. The lady looks at her computer and holds her pen, it is an apt image, the pen is yesterday’s instrument, the screen is a portal to the future. It is a confusing image just as IGC reports are giving confusing messaging. The future is surely a joint report which includes the master trust and contract based plan – as well as the legacy of non-workplace pensions.
Value for Money
This is the first IGC report I have read that has adopted the FCA’s demand for GPPs to be benchmarked against other workplace pensions. The FCA suggested that the benchmark might be Nest or People’s Pension and Aviva have followed that line with an exhaustive comparison on costs and charges. Costs and charges have also been compared with other providers using a survey organised by Redington. Four pages of that survey are included in the appendix, I am quite baffled as to what it is telling me and frankly I found the comparison with Nest didn’t help me (an expert) and couldn’t see how it would help employers or members in choosing where future or past monies should be invested.
Similarly, the league table that has been published (using data from Financial Express) was technically accurate and no doubt compliant with FCA regulations, but it did not say much to either me , nor I expect the lady on the title page
I was left wondering….
What is the relevance of three year reporting?
Are these returns adjusted for costs and charges born by the member?
Do these figures translate into the internal rates of return of members (what people actually got)?
I have no satisfactory answer to these questions. Until performance is measured by what members are actually getting , taking into account the timing and incidence of contributions relative to the size of the pot (the Net Asset Value), these performance figures are of little use as a measure of value for money.
So we are left with the ICSs usual conclusion.
It is hard to see much progress being made on value for money reporting until it is based on proprietary data, the use of external sources of analysis (Redington, Financial Express) does provide independence, but ultimately nowhere since there is nothing in this analysis that talks to the saver’s experienced outcome. I give the VFM assessment an amber.
Tone and style
The Aviva IGC team is very stable – with its chair now in his 8th year on Aviva governance boards (6 chairing the master trust, four of the IGC). The style of the report is confident and delivery assured. At 70 pages this is a very long report and it is full of good information, I found the section on investment pathways and the adoption of ESG extremely good.
The balance between appealing to the expert and to the young lady with a pen and a screen was maintained throughout and the production values of the report were high. I would query the amount of padding by way of stock photos, these made the report hard to navigate, there was too much scrolling to be done and I got lost a number of times – the index not being overly helpful (some links from the index would help) But these are minor matters. Overall this is a very well written report and I give it a green for its style and tone.
Effectiveness
The induction of Georgina Stewart (of Tumelo) to the IGC is welcome and she is clearly making her mark, “Aviva needs to continue to integrate ESG factors within investment funds and so so faster” .
Aviva are right to boast their pedigree, they were the first insurer to address ESG factors as has been acknowledged by sources as various as Shareholder Action and indeed this blog. This work well predates the formation of the IGC.
Despite a false note of triumphalism (unnecessary in my view, I can agree with the IGC’s conclusion
The IGC are addressing the important issues, including the delivery of Aviva’s ESG through all its products (including pathways). For this I will give it a green, though I feel that unless a better way to provide people with proper benchmarking of their experienced performance, the IGC will fall behind and eventually become a compliance exercise.
