Policyholders can look forward to their own app…

The Virgin IGC  published  its Independent Governance Committees’  report on 28th September. I was under the mistaken belief that Virgin had downgraded its IGC to a GAA. I was wrong and apologies to Virgin Money , its IGC and in particular the IGC Chair , Dianne Day, who I have a great deal of time for. It can be read from this link

Over the course of the past few years, there has been much talk that the Virgin Stakeholder, probably the worst workplace pension to get its own IGC, would be replace by something rather better and we learn from the IGC that this has not happened.

As a reminder, we expect that later
in 2023, policyholders in the Virgin
Stakeholder Pension will move to a
personal pension plan, with a modern
digital service platform, and the Virgin
Stakeholder Pension Scheme will be
closed. While we await this transfer,
which disappointingly has suffered
extensive delays, we assess value
for money in line with similar legacy
workplace pension plans.

Perhaps my misapprehension was linked to an over-confidence on my part that those stuck in the stakeholder plan would find themselves in something better than a “legacy workplace pension”. The IGCs benchmark for VFM does not set a very high bar.

The photo that heads this blog is snipped from this year’s report, which may be included more in expectation and less in hope, but does at least suggest that the new plan will be fit for the twenty first century.

I am not sure it will inherit the greatest of default investment options. We learn that in 2022

Virgin Money, in consultation with abrdn, made a
conscious decision to make no immediate
changes to investment strategy, believing
the design still fit for purpose. Returns,
while negative, were within tolerances
given the extreme shift in interest rates.

But we can expect from the new plan, investment pathways, which still aren’t available under the Virgin Stakeholder plan. The IGC will continue in 2023 – looking after the investment pathways, much as Vanguard’s does.

Frankly , policyholders are not being offered more than they deserve and rather less than they are able to get elsewhere. While the IGC is happy to consider the stakeholder plan as offering VFM relative to other failing arrangements – theirs’s is not a ringing endorsement.

To the assessment itself , Virgin Money’s Jonathan Byrne, offers an anodyne response , recognising that 2022 wasn’t a great year for investors and accepting that what has been promised pension investors was delivered to ISA investors. I give the IGC a green for its VFM assessment.

Effective?

Dianne Day has been chairing the Fidelity IGC in Kim Nash’s maternity and she is an experienced operator, she takes over from Sir David Chapman who was one of the very few IGC chairs not to sign off on the provider’s VFM. Dianne can’t sign off this one , though for different reasons.

Another requirement from the FCA is to
tell your employers if, in the IGC’s opinion,
better value may be available from
alternative workplace pension providers.
However, your IGC is unable to fulfil this
duty, and the FCA is aware, given the
status of the Virgin Stakeholder Pension.
In 2018, Virgin Money decided that it would
no longer offer the Virgin Stakeholder
Pension as a workplace pension.
The Provider wrote to all participating
employers, who then put new pension
providers in place for their staff. There is
no ongoing relationship between the Virgin
Stakeholder Pension, your IGC and your
previously participating employer.

The idea wasn’t just to sether links to employers but to focus on the saver’s experience. Savers left in the stakeholder plan now have nothing but the IGC and the FCA, to protect their value.

But the new “glidepath” default is holding up reasonably well.

The admin works, the member’s experience is not great but is not catastrophic (as it was in 2022 with two of the major insurers). There has been a small dilution in charges , but the proposition is still too expensive for what it is, the IGC is aware, it will be interesting to see what charge improvement can be negotiated for the new plan and what the costs of the investment pathways will be.

I’m not so impressed with the IGC’s scrutiny of what it calls “responsible investment”.

This is a rapidly developing
area for pension product providers. We
concluded that Virgin Money is still falling
behind the market in formally documenting
and implementing their policies, although
their investment adviser, abrdn does
take ESG factors into account in their
stewardship approach.

There may be a limited budget for this kind of work, but abrdn has ample resources, Virgin Money is a brand associated with consumer value, there is nothing stopping Virgin ensuring policyholder’s money matters – I’d like to see a little more implementation and a little less “intention”.

I’d also like the IGC to explain a little more about the funds the default uses. All we get is tables on charges and performance, but how were the charges spent and what attributed to the performance?

The IGC sounds like it could and should be more effective in ensuring Virgin are making proper use of their asset managers and communicating value to their policyholders. I give them an orange – there is awareness but policyholders need more action – the IGC gets an amber for effectiveness.

Well written?

At 29 pages, the report is short and (as mentioned above) too short on detail on what the investments really do.

Day writes in a clear unencumbered style and , unlike other reports, it does not read like parts of the report were simply cut and pasted from elsewhere.

The  report has a clear narrative and makes sense. It will make the previous chair – David Chapman – proud. I give it a green for tone and style.