John Lapin writes an article I had hoped would be published by  a serious magazine like Corporate Adviser. You can read it here . This is from John Lappin, a most challenging author.

The Group Personal Pension had its day in the early years of the century before the master trust took off and when employers were getting fed up with being responsible for the performance of a DC scheme. Most notable was BT which went from BT DB to BT Occupational DC and then to GPP with Standard Life. It was given the rather grand title of Group Self Invested Personal Pension as if 90,000 engineers would invest for themselves. In practice it was and is a super low charge default with some fancy bits around the outside, all dressed up in a contract between saver and insurer.

For all the fuss about personal empowerment, GPPs are nothing but an alternative to ISAs, with marginal tax advantages but no vision other than to provide wealth. But back to John Lappin’s article and his article’s complexity.

A personal pension is not strictly or “unstrictly”, anyone’s property but the employee’s.

Peter Glancy of Scottish Widows rightly says

“Under contract law, assets are owned directly by the scheme member, with an individual contractual relationship between each member and the pension provider.

But insurers and those like Hargreaves Lansdowne and True Potential who run workplace pension GPPs have some tough questions. Can they provide for staff a guided retirement till death? Can the GPP’s count towards scale? How can IGCs match the expectation of engagement with the lack of engagement in GPPs?

As it stands, the only thing an employer can do is negotiate down the price that staff pays for the default fund they’re mostly in.

“While contract law generally allows one party to vary terms in favour of the other without consent, ega price reduction, any change where the benefit is not unequivocally clear, would require the agreement of both parties.

Here’s the nub of it, it is very hard to move away from a Group Personal Pension

The provisions in this new Act are designed to enable bulk transfers between products or providers without this member consent. “This effectively introduces a limited override of contract law, where it can be demonstrated to regulators and an IGC that the transfer is expected to benefit the majority members in a range of plausible future scenarios.”

The limited override of contract law may seem possible in the light of the Pension Schemes Act but there are a lot of opportunities for lawyers to put sticks in the spikes and stop the progress of this bicycle.

He says trustees and providers are increasingly expected to use existing bulk transfer powers proactively where they can evidence that the receiving arrangement delivers outcomes that are better or ‘no worse’ under VFM.

In practice, he says, this requires more robust and consistent VFM comparisons and enhanced member outcome analysis, particularly around default investment design, risk management, adequacy of retirement pathways and independent trustee, fiduciary and adviser oversight.

The real test, Gareth Doyle of Barnett Waddingham says,

will be consistency as to how these standards are applied across providers and trustee boards, and the transparency of this decision-making.

We have no real tests of what is good and what is bad. There is no VFM standard that can allow employers to require a dog of a GPP to be transferred to a beautiful master trust or (dare I say it) a CDC mastertrust.

That is not to say that future contributions can be sent elsewhere and members encouraged to make personal decisions as to what to do with money in their personal pension.

But is there really any impulsion on employers to bulk transfer GPP money to something new? Where I can see advantage is to providers of both GPP and mastertrust. I can see insurers such as Scottish Widows , Standard Life, GPP and Legal & General saying enough of GPPs and the IGCs they bring with them. Not only are master trusts more manageable but they need to be of size both to meet Government requirements and to access the kinds of investments that are exciting the larger master trusts.

Discount L&G and all insurers have a master trust size problem that could be most easily solved by counting workplace pensions in with master trusts. Indeed those insurers (most obviously Royal London, but there are insurers with large legacy books of personal pensions, who will lobby for the retention of the GPP.

My conclusion is that the GPP is already a legacy product that should be swapped for an occupational master trust for future contributions but which remains immune from transfers without member consent. It will take a bold consensus between Treasury and WP, ABI and Pensions UK, advisers, lawyers and trade unions (who may represent staff) before the question is resolved.

I see GPPs as a legacy product before too long, but with a long tail of unloved and unwanted pots with only IGCs to love them!

Last year was the first that I did not review the IGCs, only Royal London sent me their’s. The IGCs have a much diminished jobs and I can no longer give them the time they still deserve. People’s money is the same whatever pot it’s in.