I enjoyed Kirby Rappell’s explanation of how his firm -” SuperRatings”-  has succeeded in Australia providing consumers with value for money ratings on their “pensions”.

You can hear him talking to Nico and Darren here on  the latest podcast (#142)

If we are in the learning game from Australia, we should start with the biggest learning from the rating of Supers. The lesson is that the value offered by DC workplace pensions does not matter to employers in Australia  though it does matter very much to their employees.

This lesson has not been learned in the UK when our Value For Money assessments will be targeted at employers and not at those who will get paid pensions from the DC pots.

There is no evidence , even where failure is obvious,  that employers turn their back on pension providers either from the publication of absolute or risk adjusted returns.

This is a page ripped out of a report at random. Did it mean anything to savers in  2021 , does it mean anything 5 years later? Did it really change who saved into what by employers?

Employers buy on costs not performance.

The only factor that has bothered employers is the amount their employees have been paying to save and this has been influenced by cost tables (not net performance tables) drawn up by consultants.

The performance numbers become important to consumers when  individuals are given ratings that tell them the amount of pot (and in the future pension) they earn per pound invested by their provider.

Individuals might buy on performance if they got their returns. I am not sure that this discussion tells us very much about what people think that workplace pensions are for , fourteen years on from the outset of auto-enrolment. In Australia, “Supers” are intently compared and individuals decide who will carry their savings using “stapling”.

People will be expecting their pots to pay pensions. In the UK we will be expecting workplace pensions to appear on the pension dashboard and appear they will as pensions.

So with employers showing no interest in anything other than charges and individuals having no idea what they’ve got from their workplace savings other than a pot, it is difficult to see VFM as anything other than a regulatory test. Just what the FCA and TPR will do with the information that they get from VFM returns is unclear.

Where there is a lot of difference between Australia and the UK is that in Australia data is paid for by Supers (master trusts) and in the UK, despite the pound for pound  initiative, there is no use of VFM to improve member outcomes – yet.

There is no obvious reason for the VFM consultation other than to tie the actuaries up for 220 pages in discussion on how best to come up to umbers people aren’t very interested in. But the latest VFM consultation does get one actuarial very excited and I can see that there will be a lot of arm wrestling to come.

We do need to get people a lot more informed about what is happening with their savings but what matters is more than the commutation to tax-free cash. What people need to feel good about is mostly  how their and their employer contributions are converting into pensions and what expectation they can have that those pensions keep pace with inflation.

The Australian experience of VFM as explained by Kirby Rappell has nothing to do with this and is very much about performance measurement. The UK experience of pension VFM may be quite different.

If we are to think of pension saving in the terms that pension dashboard will present outcomes,  then this statement rather blows the VFM estimates out of the water.

Can we do performance measurement very well – anyway!

There is no doubt that many workplace pension providers cannot do performance measurement. AgeWage has been trying to get data for individual savers and we have taken over 10m records through our system.

We have got a composite benchmark return that can be compared to see whether value has been achieved. But most pension schemes we have approached to do measurement have been either unwilling or unable to provide us with information so that we can share it with IGCs , trustees and employers.

When members have been given information on how they have done with each provider they use, they have been able to make comparisons and some have taken decisions to focus on providers who have given them value and take money away from providers that haven’t.

But we have had to withdraw this service because . valuable as it is considered by savers, it required us to be authorised as the scores people got were considered as advice. So long as this is the case, I cannot see how comparisons , of the kind the FCA are proposing, can be distributed to consumers and – since the employers are showing no interest – I suspect that we are requiring all this too late.

We do have a chance to do better on VFM . That is by measuring the progress of contributions to pensions which is what CDC pensions require. I fear that DC saving is too far gone for the proposal the 200 page VFM consultation puts forward.