Good governance and outcomes – Rona Train looks into the crocodile’s belly.

The latest VFM podcast from Darren Philp and Nico Aspinall is out and this week’s features governance expert – Rona Train. Rona is a consultant at Hymans Robertson.

It’s an enjoyable listen, if a little pedestrian. The cutting edge of the VFM framework is not the “governance” but if the VFM framework improves governance, it will be down to people like Rona.


There’s a long discussion at the start about a concept I didn’t knew existed – the “post retirement master-trust”.

What is a “post retirement master-trust”?

The idea of throwing people out of company pension schemes at retirement is not one that I recognise, but it’s clear that a lot of DC occupational schemes aren’t offering much by way of a pension. Passing members over to a “post-retirement master trust” could be a way of offering a safe harbour or simply a means to pass the buck, depending on what such a master-trust did.

The ensuing discussion on DC governance gets caught up in the weeds as different models are discussed. It gravitates towards  a discussion of group-think and concern about the lack of diversity of thought that could lead to pension schemes “herding” to avoid being either too good or too bad.

Having got half way through the podcast, I was beginning to ask me when someone was going to say something that wasn’t so consensual that it didn’t fall into the “group-think” weeds. In short, I didn’t think we were actually getting anywhere.

But things got better and led me to think that the trickle down impact of raising standards in governance generally, should improve VFM , but I have say, we had to go around the houses to come to that conclusion!

Focus on members not “membership”?

It is interesting that discussions on workplace pensions almost always focus on the word “member”. A large part of AE is not about members at all but about savers who use insurance policies through GPPs and GSIPPs. The BT workforce saves into a Standard Life GPP, Asda and Boots into L&G GPPs , Nationwide uses an Aviva GPP.

“Value for members” is the wrong formulation – it excludes so many employers and staff who are not members of a scheme.

Rona came round to talking about governance of GPPs at the end of the podcast but I was surprised and disappointed that no mention was made of IGCs and GAAs, which could be a force for good for people who saver for retirement and aren’t members.

Value as the employer contribution?

The discussion on the value of employer contributions into a pension is another tricky area. People choosing jobs on total reward (including the value of the pension contribution) are obviously being sensible. The discussion on wage increases for public sector workers is increasingly highlighting the value of a defined benefit pension promise.

Unfortunately, this line of discussion leads us away from value for money and into a discussion of the value of the job.  Discussions on “scheme design” , including the fairness of matching, are really about the prioritisation of deferred over immediate pay.

The discussion moves on to a discussion on fairness of contribution structures which includes mention of the PLSA Pension Quality Standard (a badge for employers who spent a lot of money on pensions). Sadly, the conclusion that anyone who knows about PQM draws, is that PQM is a means for employers to be recognised for pension spend – not VFM

Driving up standards

Darren , very helpfully, diverted the conversation away from another rabbit-hole, the role of single employer trusts – .Rona worryingly mentioned an employer wanting to move away from its trust based arrangement to a multi-employer scheme with a projected loss to member outcomes of 10%.

Rona was keen to state “it is not being about cost but about outcomes” but was challenged by Nico about why a single employer trust can provide better value than a master trust.

I have to say that Rona’s arguments for single trust schemes don’t address how a trustee moving from a single trust to a multi-employer scheme can lose 10% of member outcomes.

For the extra costs of running a single employer trust to be justified, there needs to be an ongoing cost/benefit analysis.

I am very nervous of arguments that single employer trusts provide some kind of gold standard or benchmark – however I think this view is prevalent and not always for the right reasons,

The crocodiles’ jaws.

Rona goes on to express her concerns about multi-employer schemes (GPPs and mastertrusts) snapping up and digesting employer schemes and for those schemes sitting in the crocodile’s belly without review or attention.

Rona – who is a governance specialist – calls for employer sponsored GPPs to use employer governance committees to ensure that what’s in the crocodile’s tummy, is properly reviewed.

The problem , as Darren points out, is that most employers do not have the appetite for this and sadly that goes for employing Rona and Hymans Robertson too. Most employers  will sit in the crocodile’s belly indefinitely, unless a negative VFM assessment forces them to be vomited out.

Can governance do it?

Good governance can do what the VFM Framework sets out to do – provide good member outcomes. But, as this podcast shows, the majority of employers do not have direct access to any kind of independent governance because there is no framework they can be a part of.

Hymans and other consultants are vital to ensuring that standards of governance are maintained and I’ll at a meeting they are hosting on this next week.

What the VFM framework can do , is ensure that value for money is on the agenda of all employers – and not just those lucky enough to afford Rona.

About henry tapper

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