This blog argues that advisers have no business interfering in the IGC’s and Trustee’s analysis of VFM.
I have since their formation in 2015, thought IGCs in the pocket of the providers who pay the wages of their “independents”. In all the time that red amber and green has been declared by IGCs, we have only seen one “red” ever declared by an IGC chair. That was the Virgin IGC’s reports from 2018 to 2020 .
How independent are IGCs and commercial pension trustees?
I am pleased to see that TPR has issued in its CDC code a requirement that Trustees do not act to promote the scheme to anyone, including the regulators.
CDC (Phase 2) Code – Consolidated modules document
The trustees are prohibited from conducting any promotional or marketing activities on behalf of the scheme. However, they are not prohibited from meeting with prospective and existing employers to provide factual information regarding the scheme or general information about how a CDC scheme operates. This would include details of the following:
- number of members and assets under management
- details of how the scheme is administered
- how they interact with the scheme proprietor and monitor the effectiveness of the scheme’s governance
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differences between a CDC scheme and a DC scheme
Trustee meetings with employers or prospective employers do not need approval however the use of any promotional/marketing material is prohibited for these meetings
For multi-employer CDC schemes only, the following must also be included with the application
- a statement signed by the trustees of the scheme confirming that no trustee promotes or markets the scheme or acts as the chief financial officer of the scheme
I hope that this will equally apply for Trustees and IGCs in time and that they will be empowered to say what they see not what they are asked to say by the people who pay them.
How independent are consultants?
Already we have consultants advertising their capacity to help trustees and IGCs carry out their duty. Who pays these advisers and what are the adviser’s motives?
If every report renders the scheme or personal pension plan VFM, where are those aren’t?
I do not say that Jonathan Parker of Gallaher is planning to help his clients to declare their GPPs , master trusts and own trusts as delivering VFM. But I am quite sure that we will see with DC schemes and maybe in CDC schemes to come, advice that ensures that everyone is in a narrow band of outcomes that ensures that no-one gets closed down.
And here we will see herding to what TPR and the FCA determine VFM. If what is required is to determine what the schemes and groups of plans have delivered, it is fairly easy to work out how people have done. Take the entire data set (millions of data points) and work out the Internal Rates of Return of all the savers in a DC plan (there are well over 10m of them in one master trust).
That will tell trustees what has happened and from there they can determine (against a benchmark) whether the scheme or group of personal pensions has delivered value.
You do not need an adviser to work out how people have done, you need good data managers and a system that benchmarks how your members and policy holders have done against the average return for these people.
You do not need an adviser nor do you need advice. If you have the results of the data analysis you’ve commissioned on you people’s experience, then you can say with certainty if you have or haven’t delivered value for money.
If you don’t use data but depend on advice , you end up with this twaddle, which we’ve had for 10 years from IGCs and Trustees
Even if I use the Corporate Adviser “Cap data” , I can get a proxy for the proper way. It shows that some schemes and group of plans have done well, some have not. Some of the plans pre-date the start of Auto-Enrolment in 2012, some started recently but all have data which should give trustees and IGC members the answer to the simple question
“Have our savers got value for money”
The answers that we are looking for right now are not about pensions but about saving for them. When we start measuring VFM for pensions then we will be faced by the Government’s claim that CDC delivers up to 60% more pension than a DC pot.
We long ago stopped expecting members to read an IGC or TPR report; employers aren’t interested either. They are not considered a true report on Value for Money. VFM reports are now just for regulators (and advisers).
