VFM as ROI – not what we need in pensions!
Helen Ball has produced a superb article on benchmarking the workplace pension we are in against those of our neighbours. She starts like Jane Austen with a “universal truth – generally acknowledged”.
We are all nosey and love to know things about other people. It helps us work out where we stand in the pecking order. Are we missing out, or are we one of the lucky ones? There’s no getting away from comparison, whether it’s the neighbours, the kids or our colleagues.
I once asked for a meeting with Ian Pittaway, Helen’s head of department who told me we could discuss anything but benchmarking! Just as we love to see league tables, we hate the risk we might be at the bottom.
Ian has subsequently led the way in helping savers work out what they are getting through some excellent IGC reports for Aegon. These reports have been used by Aegon clients to renegotiate their contracts with the company and Ian has done more than most to help us compare what we have – with what others have. Nonetheless, I recognise how hard this was for him and how hard it is for other IGCs conflicted by being judge, juror and client of the provider they assess.
Which is why Government is pushing for more benchmarking through the VFM framework. That may or may not work in levelling up workplace pensions to the best. TPR are doing a pretty good job of weeding out failing master trusts and the DWP’s latest consultation on the General Levy looks like providing a nuclear option. If you are running a workplace pension with less than 10,000 members – you should be asking yourself “for how long”.
The die is cast, the Rubicon crossed, we will have a premier league of workplace pensions and perhaps a championship, but the extended pyramid stretching down to EPPs and SAAs will go.
And this means that what Helen is talking about – is more likely to happen. She argues that Government intervention is vital to creating confidence that what we pay our payroll deductions into – is worth the sacrifice.
That will delight the nosey folks because it means we will get to find out even more about what is happening in other pension schemes besides our own. The idea behind this is that people can check if they’re getting a good deal or not, and drive a better bargain in the future.
Of course this will mean change for a pensions industry which is deeply conservative about how it allows itself to be measured.
New infrastructure will be needed to help trustees and IGCs manage lots of additional bits of data.That data will need to be captured, stored, shared and discussed. Yes, I’m afraid so– best look away now if you have a nervous disposition around reliance on technology and other third parties.
It might lead to interesting questions around who has accountability for delivering the necessary data and what happens if the party who is supposed to provide it to you lets you down.
The DWP wrote to me that measuring VFM using what happened to member’s pots (rather than what fund managers report on their gross performance) and had no support from the industry. They even said as much in their consultation response. They are quite right. There is no intention among those who sell us financial services to be held account by the member’s experience. VFM is still for marketing departments!
But if Helen Ball is right, that might all be about to change. Benchmarking workplace pensions is trickier than we think because everyone’s experience is different (a mantra of Darren and Nico’s podcast). If we are ever to allow people to make decisions for themselves, we had better start by telling them how they are doing.
Tonight, SUEZ are up for an award at the CIPP conference for telling each member of staff saving into an Aegon workplace pension, HOW THEY ARE DOING, and they’ve been doing this for some time.
It’s fairly common for today’s value assessments to compare one year to the next, the aim of a good scheme being to show that value is improving over time.
Of course value does not always improve over time and the point of a benchmark is to show that there are schemes that don’t improve and don’t beat the benchmark. This is the risk of doing your own benchmarking!
Which is why SUEZ are so brave and why their AgeWage project is so important. SUEZ staff know when Aegon are winning and when they are losing. VFM is not a marketing tool.
