As you might expect, Standard Life’s IGC report paints a very rosy picture of the value Standard Life savers are getting for their money (the pointer heads right not left).
What you mightn’t expect are the calls to action to Standard Life policyholders to
- consolidate to products with lower charges
- pay more into your pension
- think about buying an annuity
- Give Standard Life your email address
The IGC report talks quite a lot about “scope” and when this report remains “in scope” it is very good. But I am not sure that this sales pitch is in scope. Switching pensions on the basis of charges is just what the DWP/TPR and the workplace pension providers are trying to stop employers doing. The Value for Money Assessment Framework is asking employers and ultimately consumers to take decisions on value for their money, charges is an element but only an element. The call to consolidate on charges comes twice.
There are other questionable statements in this call for action. Reviewing your retirement plans need not necessarily result in paying extra contributions to your workplace pension. You might consider topping up your state pension credits or – if your plans fall short – cutting back on your plans.
Did these call for action come from IGC chair David Hare or Standard Life? It may or may not have been but these calls for action are repeated throughout the VFM assessment. They are not so much calls for action as advertisements.
The Value for Money Assessment
Standard Life’s IGC takes the Government’s metrics for VFM and adds to it a number of extra considerations
• Communication and engagement;
• Customer service; and
• Investment services (e.g. default investment fund design
So the VFM assessment is peculiar to Standard Life, which doesn’t help in taking a standard view of value for money.
The matter is further complicated by Standard wanting to create three views of VFM
- Have you received VFM?
- Are you currently receiving VFM?
- Going forward, can you expect to receive VFM?
The IGC choose to focus on (2) and (3) . I suspect their customers are more interested in (1) – “how’ve I done”. The older you get and the longer you’ve saved the more important the past is to you. As an older person , I’m not sure I agree with the IGC’s view that the past is less important than the future.
Costs and charges
Standard Life, like all workplace pension providers, are concerned with a “race to the bottom” on charges. The FCA is however looking for the IGCs to provide a benchmarking service so that customers (employers and savers) can see if they are paying too much for their workplace pension.
Standard Life have created an online calculator that allows you to see the fund you have chosen and see whether you are paying more or less than others for it
This is ok as far as it goes, though we could do with seeing some of the secret stuff, where Standard compare their comparable funds with those of their rivals. There are two issues here for employers – 1. can I get a better deal from Standard life and 2. Can I get a better deal from the market. This methodology only addresses (1).
Following the call to action on charges, employers might want to choose a provider which offers lower comparable charges. – precisely the opposite of the intention for the VFM framework.
As with charges, the IGC prefers to benchmark internally. We have this performance graph that shows how the highest and lowest key defaults performed in 2022, but there is no external benchmark. This makes it hard to make much sense of what happened in a wider context.
Where there is comparative performance, it is anonymised and selective.
and when it comes to the Value Assessment of all the funds in the Standard Life workplace pension universe , we find that a large number go unmeasured
Surely it’s time for the 55 unrated funds to be taken off the platform 13% of the 484 funds in scope – as well as the 9% in red?
I have little more to say about the investment performance methodology (a Standard Life/Redington) creation , as its results are not being published. So long as the performance results of the leading workplace pension providers remains behind closed doors, I will continue to question whether the assessments made carry any validity.
But I struggle to equate this statement (from the IGC) with the 83% success rating given Standard Life’s funds by the process adopted
Two points are worth considering in relation to the 2022 results. First of all, the majority of Standard Life funds were in the bottom half of the table, that is in the bottom two quartiles. This is similar to the situation seen in 2020 and in 2021. Secondly, there are some signs that the situation is not improving.
Over the 15 years to 2022, 43% of funds were in the top two quartiles, whilst in the five years to 2022 the figure was 37%.
This occurred because the earlier, better performing, years have been replaced by recent years that performed less well. It is not immediately obvious what has caused this drop because, although we can analyse Standard Life’s performance, we don’t know how competitor results were achieved. One possibility is that other competitor funds invested more aggressively in fast-growing equity markets outside the UK. Nonetheless, this is an adverse indicator for your VFM as it suggests that better results could have potentially been obtained elsewhere if you (or your Employer) had made different choices.
The final paragraph is a little disingenuous. The funds that are on the Standard Life platform are mainly from competitors (though not all give Standard Life data about themselves). Standard Life’s in-house investment team should have a good idea about why their funds are generally under-performing (but clearly don’t).
So I am more than stymied by non-transparency, I am baffled by the numbers. Do Standard Life customers get good outcomes or not? Or should we just wait 25 more years to find out?
Quality of service
I must admit to glazing over at the multiplicity of charts in the quality of service section.
Standard Life do “comms” well and they pay attention to the detail when transitioning funds. They have glitches – but not the glitches of their competitors.
The report as a read.
As ever, David Hare writes in a clear and engaging style with an eye to his customer (the saver).
The report is 150 pages wrong, with 70 pages of supporting documentation. But the key sections on costs , investments and service are concise and informative.
The additional sections on communications and investment transactions don’t add a lot. They tell us they are areas that Standard Life feel proud of, and I don’t knock them for that , but with other sections on investment pathways and ESG, it makes for a very long read.
This is mitigated by the layout , with helpful tabs (as used by Royal London) to help the reader find his/her way around.
The IGC is clearly on top of many of the insurance issues, I found the section on with-profits helpful and clear and there’s no doubt that the IGC is doing its job or helping improve VFM. It hasn’t been helped by a large amount of member turnover (a worry).
I give the report an amber for its VFM assessment , a green for its content and tone and a green for its effectiveness.
I think this would be a better and more impartial report if it dropped the calls for action.