Royal London’s IGC report for 2021 is a rather dour affair, in contrast to others. Its sombre colour scheme is complimented by a formal style of delivery with an emphasis on good governance rather than member engagement. Even the “if you only have 5 minutes” summary takes a good few paragraphs of explanation before getting to its points.
This style is quite the opposite of early Royal London IGC reports that I criticised for being overly flamboyant to the point where they read like an extension of the firm’s marketing literature. I prefer the approach adopted by the current Chair , Peter Dorward, though it makes for a stern read.
Royal London is the only large insurer in the market not offering a DC master trust to compliment its group personal pension. The corporate distribution strategy has been to use financial advisers and corporate benefit consultants rather than the large actuarial consultancies. This has cut Royal London off from a large part of the new business enjoyed by its rivals.
The report shows the universe Royal London sits in , by including in the appendices pictograms produced by Corporate Adviser
It is a shame that I have to report on pages 56 and 57 of the report as the most memorable things about it and that I have to include a third party survey to give readers information that is compelling.
The emphasis on “governance and regulation” that permeates the report makes for a rather inward looking approach which seems to be talking as much to financial advisers as the savers who the report is supposed to be addressing. For instance, the major development for 2022 for Royal London suggests that the IGC may be redundant
Moving forward Royal London has a number of
regulatory changes to implement, including the
introduction of the FCA’s new Consumer Duty in
2022. This is expected to represent a significant
extension to existing regulatory requirements
which will require firms, including Royal London, to
be more proactive in the pursuit of good customer
outcomes. We expect to be able to report on this
in our next annual report.
I wonder whether the consumer duty isn’t supplanting the need for an IGC. In terms of its tone and the presentation of its content, I find this focus on governance and process prohibits engagement with the essential question we are trying to answer, namely
“is Royal London delivering value for money?”
The report is a little too dour, a little obsessed with process over outcomes and in a word “dull”. I can only give it an amber for its engagement through tone and style.
Value for money assessment
As the charts above show, Royal London’s default fund was delivering average returns at slightly below average risk. We will have to wait till next year to know how the investment strategy measured up to the headwinds of 2022, but as a statement of fact, I can agree that taking into account the evidence in this report (of which there is plenty), Royal London appears to be giving value for money.
But I wonder for the individual policyholders who have to ask themselves whether they are better in a Royal London policy to one of their rivals. Take this table which allows the report to conclude
We believe Royal London has achieved
appropriate returns for the level of risk taken.
I don’t see how that conclusion can be drawn from those numbers. Maybe I am not sufficiently engaged but there is a disconnect between what I’m reading in that table and what the IGC is telling me it’s telling them. And this is a problem that the IGC acknowledges.
Royal London continues to invest and evolve its
capabilities to communicate with customers
helping to support better engagement and
outcomes. The Comparison Study found that
Royal London compared well in a number of
areas. There is however work to be done to allow
more effective comparisons to be drawn between
providers. We continue to encourage Royal
London to prioritise areas of communications
that have the greatest impact on improving
Surely what customers want to know is how their outcomes are comparing with people who’ve had their workplace savings invested in funds at Nest, Peoples and others?
In its last report, Royal London promised its savers they would be able to access information on their individual achieved returns. This may or may not have happened but it is not reported on here.
The “Comparison Study” – presumably the Redington Study, is not published, so we only have the IGCs word for it that value is being achieved. Other than the charts in the appendix, members learn little from studying this report.
I can only give the report an amber for its value for money assessment. Future reports need to be a lot clearer about communicating member outcomes and whether they are improving or deteriorating.
Having moaned about the report itself, I am happy to say the report shows the IGC are effective in their working with Royal London. There is evidence that the legacy issues that I have reported on elsewhere relating to people being kept in long dated gilts in the latter stages of lifestyle appear to have been addressed.
The IGC is on top of important issues such as the transaction costs with the governed portfolios that Royal London use, it is equally on top of Royal London in its work on ESG integration and I like the attention to detail in the section of the report dedicated to the new investment pathways.
In short, this looks an active and diligent IGC, working for members. I give it a green for being effective.