This article focusses on the IGC Chair’s report for ReAssure, published in September for the year to the end of 2021. As its Chair, David Hare makes clear, it doesn’t include the member experience for 2022, that will follow – hopefully in the normal April window – in 2023.
ReAssure, as the name suggests, is a home for unloved books of business which parent Phoenix wishes policyholders to consider now in safe hands. So , L&G’s book of legacy pensions purchased into ReAssure Life is given a positive Value for Money rating, even though the IGC’s dial is pointing more to the red than positive green territory. The message is “hold on – help is on its way”.
As the report says
The IGC believes that “ongoing VfM” is fundamentally a
forward-looking measure. Thus, of the following three questions:
1. Have you received VfM?
2. Are you currently receiving VfM?
3. Going forward, can you expect to receive VfM?
our assessment is mainly addressing questions 2 and 3.
The difficulty with this approach is that it avoids people’s natural curiosity as to what has happened to their money in the past in favor of speculation as to what might happen to it in the future – in short , the reader ought to question whether this report is about their experience or a marketing document.
Anyone who has saved into personal pensions with GAN or Crown for instance , is unlikely to have had a pleasant experience to date, high charges, poor investment governance and minimal customer support would make a backwards looking assessment of the VFM from these policies categorically fail them.
The policies that remain are available to be upgraded
All ReAssure Ltd customers have the option to switch to low cost funds with an ongoing charge of 0.65% per annum with ReAssure Ltd and, in your Annual Statement, you will find information regarding these funds and alternative product options ReAssure has made available.
and the IGC urges those who are paying more to consider paying less
We strongly encourage you to engage with these communications. By taking action you could reduce your regular ongoing charges to 0.65% p.a.
These being personal pensions where there is no board of trustees to muscle change through, this is the strongest nudge in the IGC’s armoury.
But the nudge is simply based on price, is cheaper always better? I suspect that those who have yet to action a transfer from these crummy policies may have no other means to compare pensions , which once again suggests that we need a simplified way of rating VFM beyond just price. It is hard to see a measure created that did not rely on past performance as a guide to the future.
The VFM assessment employed by ReAssure may lead to better outcomes , but it is , in itself, little more than a price comparison process. I applaud ReAssure for its upgrade and the IGC for promoting it, but I do not think this process is the way to promote value. I give the VFM an amber – well meaning and probably effective , but in the wider picture – flawed.
Tone and Content
The exhaustive analysis of a large and diverse book of business makes the IGC’s job hard but much of the work being done to improve the member experience is in common with Phoenix’s wider practice and there is a lot of “cut and paste” between this report and those assessing Phoenix and Standard Life. Where there is bespoke reporting . it is effective. This graph shows how high transaction costs are currently distributed across funds scrutinised by the IGC
David Hare’s reports benefit from his acute ability to capture complex information and present it in a way that makes its point, there are of course far too many funds, but those which have a problem with transaction costs are few and identifiable.
The third party funds analysed had considerably higher transaction costs and the IGC complained that it had difficulty getting hold of information on many.
The report told a simple story well and identified the strengths (internal cost control) against the weakness (third party cost control) well.
I have complained elsewhere that the tone of David Hare’s reports has been unnecessarily angry, reflecting his frustration with FCA instructions . That tone is present in this report, but I am happier with this report as it is more balanced by the positive news stories explained above and deep into the report where improving customer service levels are discussed, as well as ESG integration. There is an excellent section on investment pathways.
The report at 120 pages is too long but I will give it a green for its confident style and meticulous attention to duty. Of the three Phoenix reports, I enjoyed reading this the most and give it a green
Is the IGC effective?
The IGC has wrung one major concession out of Phoenix
The 1%, charge cap, excludes initial units, which remain present on around 4% of workplace pensions within ReAssure. The key challenge identified in last year’s report was to consider if any further action should be taken on initial unit charges.
We are very pleased to report that ReAssure has made the decision to extend the 1% charge cap to include workplace pensions that have initial units. In addition to this, the 1%
cap applied to exit charges (which includes initial units), will be extended to members with initial units who are looking to transfer their pension benefits prior to age 55. This means all members will now benefit from a maximum exit charge of 1%. (my emphasis).
The practice of back end loading with initial units (which pay back at the end of a policy) was more or less banned for new policies prior to Stakeholder pensions being introduced over 20 years. The majority of holders of these older policies will now be over 55, but anyone who owns “initial units” and is under 55 , should jump at the chance of jumping ship before 4%+ AMCs drag their pots below the waterline.
The IGC is challenging ReAssure to make online access available to those who have their policy details
ReAssure should continue the momentum with its objective of all IGC customers being able to access ReAssure Now
The challenge for the IGC will be to get ReAssure to reach these customers. Let’s hope that the pensions dashboard will arrive in time to salvage pots from the sinking ships!
This is an effective IGC – I give the statement a green for the diligence it shows has been carried out and the results the IGC achieved for members in 2021