Hargreaves Lansdown’s IGC report reads like a personal statement from its chair Richard Butcher and it is the most independent of the reports I have read so far this year.
By “independent”, I mean it looks at issues that may are distinctly awkward, asks questions that the sponsoring provider may not have wanted asked and come to some conclusions that may ask savers and employers asking “why are we using Hargreaves Lansdown for workplace pensions.
The answer from the IGC is equivocal
If we took an amber rating to be “not sure” then the IGC is saying that on the three key metrics laid down by the Government, the IGC has doubt that Hargreaves Lansdown is providing value for money. This is a radically different message to any that I’ve read before – though I suspect that some of the products IGCs have talked about would struggle to provide the outcomes and member experience of Hargreaves Lansdown’s Vantage.
The IGC give Hargreaves Lansdown’s workplace pension muted applause
Our overall conclusion is that your scheme and the Investment
Pathways give most members value for money.
While the costs you pay aren’t the lowest available on the
market, our assessment is that they are, in our view, reasonable
particularly when all the benefits provided to you are considered.
In general, the report thinks that Hargreaves Lansdown has the tools to do the job of managing workplace pensions, but that it falls down in presenting options to employers and savers
The report questions whether Hargreaves Lansdown have thought through the communication of its various defaults and core investment options. I am afraid that after reading the IGC report a couple of times this year, and over the years, I am still confused as to what the various funds and lifestyle options do.
Nor am I very impressed with the presentation of data about the funds, which appears to have been drawn from Hargreaves Lansdown’s Lipper account (not from the much-mentioned Redington survey)
By way of example, here are the three default choices compared to an industry benchmark (presumably chosen by Hargreaves Lansdown)
So far so good. The chart has some relevance to someone making a lump sum payment at the beginning of 2022.
This chart makes sense to someone making a lump sum payment at the start of 2018
This chart widens the comparison to include a bunch of anonymised competitors. It is pretty confusing and doesn’t say much to who Hargreaves see as competitions or why the experience of someone making a lump sum payment matters. Most of the savers make regular contributions, why can’t the chart be produced on that basis.
By the time I’ve got tot the fourth chart, I’ve lost my interest in comparative performance, the anonymised investors are being compared against a theoretical investment that bears no relation to the average experience of workplace pension savers. The chart is anonymised, confusing and frankly appears padding for the IGC.
It is good that the IGC is trying to report independently on the defaults and it’s good that it also reports on the core funds and the impact of the lifestyle funds, but what it is reporting on, is the presentation of the workplace pension by investment experts that leaves nobody much wiser. The charts are left in the report – I assume to help those who choose defaults with their decisions. But there is precious little guidance as to what is actually good or bad about these defaults that I see the section as leading decision makers down a cul-de-sac of choice.
I sense that the IGC is questioning just what Hargreaves Lansdown’s choice architecture is actually achieving.
The report is certainly querulous about the commitment of Hargreaves Lansdown to “investment pathways”.
the area of greatest divergence is in how the risks related
to each pathway are communicated in order to support
clients in making informed decisions – there is evidence of
over-reliance on standardised risk descriptions (for example
those found in the key investor information document) and
statements such as “The market may fall as well as rise
which means you could lose some or all of your investment”
which appear to go little way in helping clients make a
proper informed decision.
Indeed, though the investment pathways were introduced by the FCA for savers who didn’t have access to financial advice, the IGC resorts to referring workplace pension members to advisers
Hargreaves Lansdown’s workplace pension is one of only three with an IGC that is not complemented by a master trust. Only HL and Royal London still have workplace pensions open to new employers. I was disappointed by how little information employers and savers using the Vantage workplace pension , get from the IGC report. I don’t blame the IGC so much as the provider.
The IGC is clearly not that impressed by what is sees at Hargreaves Lansdown either. It is taking a jaundiced view of the proposition and though it recognises areas where HL impress, (workplace presentations), even here the impression is that HL is spread too weakly to make a difference
In creating distance from its provider, the IGC and its chair (Richard Butcher) are making a statement and demonstrating some independence. I applaud the blunt talking of this report and give it a green for its tone and language.
I am not so sure that the IGC has been that effective in improving the outcomes and experience of savers. The weaknesses of the proposition are in the confusing choices offered to employers and to members through default saving options and investment pathways. I don’t hold the IGC responsible for the weakness, but I don’t see it as having much control over improvement. I give the IGC an amber for its effectiveness.
As for the value for money assessment, I agree with it. Employers need to consider seriously Hargreaves Lansdown’s long-term commitment to workplace pensions. The IGC report comes as close as a report can – to saying that the provider did not provide value for saver’s money, in 2022. It gets a green for having the courage and independence to say that.