BT takes the value for money debate to its members

The debate over how to assess value for money has been prominent among defined contribution trustees and independent governance committees, with schemes looking for principles and concepts by which to judge value.

In an average DC scheme you’d be lucky if you got 20 per cent of the membership engaged to some degree or another

Kevin O'Boyle, BT Pension Scheme

Kevin O’Boyle, pensions director at the BT Pensions Scheme, said at a roundtable hosted by consultancy Barnett Waddingham this week that the scheme would be touring some of its sites to seek member feedback on this issue.

He said: “No doubt we’ll get a lot of very helpful information about what members think, want, need, how they want to be communicated with and so forth.”

The scheme is most interested in targeting members who are as yet disengaged, both to increase their engagement and understand how they judge value.

O’Boyle explained: “In an average DC scheme you’d be lucky if you got 20 per cent of the membership engaged to some degree or another. You’ve got maybe 20 per cent at the bottom end who, no matter what you do, will never be engaged, and then you’ve got the 60 per cent in the middle who are vaguely interested.”

He said those who come to open days are usually already engaged, but the real challenge is reaching out to the remainder and trying to ascertain what value for money means to them.

For O'Boyle, the biggest factor in ensuring value for money is how much the members are contributing rather than the costs levied on them, though he conceded charges are less likely to be a challenge for a scheme as large as BT.

“If I could have all our members paying the maximum and getting the maximum match, I think that would be more important than the basis points charged,” he said.

“Having said that, BT has a big scheme. I’m mean and ugly to insurance companies so I’m certain we get a good deal for our size and I’m certain we get a much better deal for our members than a 10-man widget-making company somewhere.”

Defining value

Michael Chatterton, director at professional trustee company Law Debenture, suggested four “lenses” through which to view products and services when assessing value for money: quality, risk, relevance and cost. Schemes could then choose benchmarks from similar schemes, for example by working with consultants.

“This is an area where I think the quality of data is going to improve as each consultancy does more, as each organisation forms a better view of what value for money is. Member feedback should be very valuable in this area.”

Alex Pocock, head of DC investment at Barnett Waddingham, said the 0.75 per cent charge cap, which came into effect in April this year, had a negative effect on the debate around value for money.

I think the quality of data is going to improve as each consultancy does more, as each organisation forms a better view of what value for money is

Alex Pocock, Barnett Waddingham

He said: “It seems very strange that at the same time as we’re talking about value for money we’ve got the charge cap in place.

"If you’ve got this value for money objective and obligation, you don’t need the charge cap. The charge cap leads to this focus on high charges as automatically bad, without looking at whether you get different value.”

Those talking directly to members about value for money should also stress in many cases that being in an employer scheme – even a relatively poor-value one – is preferable to opting out, Pocock added.