There was a time when large employers believed that a workplace DC scheme could do it all, offering members the freedom of a personal pension, the investment advice of a top consultancy and a charging structure that reflected group buying structure. For Fidelity’s DC workplace clients, the Fidelity GPP fitted the bill.
We learn from this year’s IGC report that in 2023 , there were only 18 large employers
with bespoke default strategies but these amounted to 39%, or £5.2 billion, of the total investments in Fidelity’s contract based workplace pensions. We also learn that several of these clients are moving away from bespoke strategies and into the new “future wise” target dated funds – presumably accepting that if you can’t beat Fidelity’s best idea, you might as well join it.
It would be an interesting exercise for the IGC, the employers paying for bespoke strategies, the advisers being paid for bespoke strategies and most of all for the members to compare the value for money from this paid-for advice in terms of enhanced returns for savers. That the flow is away from advised solutions suggests to me that the answer to that analysis is “not enough value is being created for the cost of the advice”.
I worry that comparative value is not an issue. Here is the comparison between senior and junior members of the GPP
The Target Date Fund is praised by the IGC because it has a single management charge for savers of all ages. But if you are looking back at your last five years of saving at a nominal return of 2% pa, you are looking at real (inflation adjusted) losses. If you are 30 years from taking your money, you are looking at nearly five times the return . Pick the VFM out of that!
The Fidelity IGC aren’t exactly forthright in their view of the GPP’s Value for Money.
Following our assessment this year, and after examining each
of these factors, we have concluded that Fidelity has met our
expectations. Fidelity continues to offer members Value for
Money when saving for retirement and when using drawdown to access their pensions, including Investment Pathways.
Fidelity failed to exceed the IGCs expectations but we aren’t quite sure what their expectations were in the first place. Digging deep into the report we find one phrase repeated five times
We are pleased to say that Fidelity has met our expectations in this area.
The question that policyholders and employers should be asking is the one they seem to be answering with their bespoke defaults, “could we be doing better elsewhere?”
The lack of comparative information within this report is a serious shortcoming. It suggests to me that the IGC feel they know best and are to be trusted. I know most of the trustees and they are a good bunch but if I had my money with Fidelity and wanted to know what was going on, I’d have come away a little disappointed
The best I can give this IGC’s VFM assessment is an orange,.
A veteran performance
As much as anyone can be in ten years, Kim Nash is a veteran of IGC report writing. She has a sensible and deliberate style and I get the impression that she is writing most if not all the report.
The report is 35 pages long and has very few numbers and tables. I’d like to see some more comparisons and less stock photos!
I will give the report a green for readability but I hope we will see future reports offering a slightly less comfortable read for Fidelity.
Is the IGC effective?
There has been consistency of personnel in the IGC over the past ten years and I get the feeling that they are getting a little bored.
There are some big issues facing the IGCs, not least the relevance of GPPs as workplace pensions. Fidelity operates a DC master trust , why should savers sit in the GPP if master trusts are winning most fresh mandates? Does the GPP get the investment of the Fidelity master trust- it is still a strategic product or is it becoming legacy?
I’d urge the IGC to be considering and discussing some of these questions.
And in particular , I’d like to see more from the IGC on “at retirement support”. The analysis in the report focusses on communications but there is precious little analysis of how and what the investment pathways are actually delivering. We are told that Fidelity is one of only three personal pension providers that allows its drawdown to be carried out by policyholders at no extra charge, but charges aren’t everything. We need to know if the pathways are delivering value for that money.
My conclusion is that the IGC does a lot of reading but could do some work with a calculator. I give it an orange for its effectiveness.
