Prudential, once Britain’s premier insurer has produced its 7th IGC report, the second from former Mercer CEO Bruce Rigby. I suspect that Bruce had his fingers crossed that he would get away with his VFM assessment.
Overall, the IGC judges that you continue to receive
Value for Money from your Pension
He hasn’t. If I was a member of a Prudential workplace pension (and I have been twice) , I would be spitting feathers. The Prudential are delivering poor value to members in two of the three key areas of assessment. The performance of their funds – even net of average charges – is very poor leading to poor retirement outcomes. In the meantime, the service that members are receiving is appalling.
The latter issue has been acknowledged by Prudential itself through the year. Although this happened outside the period of the 2021 IGC report, the IGC know that in Febuary the Prudential had to report itself to the Pensions Regulator for the administration of its AVC business.
I am not aware of a substantive improvement since and everything in this report suggests that there is a chronic and systemic problem with the support offered to Prudential’s members of AVC arrangements with corporate and public sector AVCs. Prudential , since the extinction of the Equitable as a marketing force, has been the primary provider of AVCs to millions of DB savers.
The IGC doesn’t fight shy of acknowledging this.
Turning to the appendix , we find the definitions of the RAG
How can the following statements from members of the IGC, tally with it having “some concerns” but not needing to “take action”?
And it suggests that customer service is not acceptable
I cannot see how this value for money assessment can conclude that members are getting value for money when the primary driver of member outcomes are the investments
Prudential funds are managed by M&G , the catastrophic performance against benchmarks and against their peer groups suggests a systemic problem with Prudential’s fund governance and reflects very poorly on M&G which – unlike the Prudential – is being actively marketed.
Similarly some of the failings on admin are horrendous
How can these figures tally with the Prudential’s obligations under the FCA’s Consumer Duty, how can they possibly be considered “treating customers fairly”?
More pertinently to the IGC report, how can the value assessment conclude that members are getting Value For Money. The report tells me the IGC should be escalating its findings to the FCA and if they haven’t , since December 31st 2021 when the assessment was made, then they should now. I can only give the VFM assessment a red for being misleading to its readership.
Effective?
The vast majority of money invested in the Prudential’s workplace pensions is invested in its DGF – the Dynamic Growth Fund (IV)
The fund presented to us as a success in beating the benchmark (CPI+3) and the ABI benchmark over a period of 7 years
But the average return of workplace default funds over the last five years has been 9.36%
Prudential’s lifestyle strategy for its default fund is cash – which yielded (net of Pru’s 0.55% cash charge) a negative return. This compares to the average one year return for a workplace pension saver approaching retirement of 4.65%
So I’m pleased to read this
The IGC has also challenged Prudential to provide
regular updates on the key default funds, Prudential
Dynamic Growth II and Prudential Dynamic Growth
IV, in order to allow the Committee to continue
to monitor the actions taken on underperforming
investments. Additionally these updates will allow
the Committee to understand what changes are
being made to address underperformance and to
see whether or not actions taken then make the
anticipated difference.
But I can make no sense of the results of its benchmarking exercise with Redington
The benchmarking study mentioned earlier also
provided an assessment of investment strategy and
performance of the key default funds relative to a
number of comparators in the industry. The overall
conclusion was that the funds compared favourably
relative to the peer group, although it was noted that
a more frequent review of strategic asset allocation
for the default funds would be more in line with
comparators. This is something which the IGC
plan to address with the company during 2022
There are good reasons for the default to sometimes target cash (for LGPS AVCs for instance), but is cash the preferred option for all Prudential savers, if so – the Prudential can hardly call their default offering part of a “workplace pension”.
I sense that Mary Kerrigan is on top of these issues and the 2023 report will tell us how effective they’ve been. For now I will give her and those struggling to improve admin standards and give the IGC a green, within their remit to report what is going on, they have alerted us to the scale of the Omni shambles.
Tone of voice – a curate’s egg
Prudential IGC reports are the sum of various parts – each produced by an expert member. It is hard to get an overall tone, there are parts of this report which are decisive and member facing and there are parts which are frankly “flannel”. I would cite as flannel, Section 3.4 and most of section 5.
Other sections were hard hitting and spoke to me as a member.
The Chair’s opening remarks were not in keeping with what I read later and though I can understand the need to reassure, this report should not be reassuring but a call to action as it is clear there is need for change at the Prudential. I give the report an amber for its tone.
