IGC reports need to tell it like it is on value for money

The FCA chooses not to put IGCs in charge of their providers “non-workplace pensions”. This was a little disappointing as a personal pension funded by a private direct debit is not that different from a personal pension funded by a corporate direct debit.

Personal pensions are written under bald trusts, with the IGC the only fiduciary in town. It is a shame that the self-employed and those who choose to save have no one sticking up for them.

If – as all statements set out by saying – the IGC is there for the policyholder, then policyholders should be getting more straight-talking. It is not beyond IGCs to produce personalised value-for-money statements in 2019

Surprisingly, the FCA included in its consultation a proposal to make IGC chair statements more accessible to the people they’re written for – those in workplace pensions.

This was a pleasant surprise, not least because I have spent much of the past four Aprils trying to find links to the statements. Apart from Virgin Money, no IGC sends physical copies of the statements.

Engagement remains a challenge for IGCs

It is one thing to make these reports accessible, quite another to get savers to read them. Most IGC reports are fudges that try to please the FCA, sponsors and policyholders. Inevitably, they end up pleasing nobody and their chair reports do not get read.

One IGC chair statement this year ruefully reported that the lowest recognition rate for any term surveyed with policyholders was ‘IGC’.

Received wisdom tells us that we can improve these low engagement levels by removing jargon and avoiding the word ‘pensions’.

But even if we insisted on reporting on retirement savings plans – there being no compulsory annuitisation – I suspect that people will still think of their workplace pension as a pension.

That is not to say that our current efforts are enough; members still suffer from dangerous misconceptions, such as the awkward finding thrown up by a 2017 Nest member survey.

Some 34 per cent of the scheme’s 5,000 members expected Nest to pay them a regular income when they retire. Anecdotal evidence from the master trust’s research shows some members expect their regular income to start automatically alongside their state pension.

Apparently, people who invest in what they view as a government-backed pension scheme, expect their money to purchase a government pension. In the wider employee population, most people think that a workplace pension plan will provide a company pension – it won’t.

Those hoping for an occupational plan offering scheme pensions will have to wait till the arrival of a fully formed collective defined contribution scheme, and that will not be before 2025. Members of Nest will be disappointed if they expect a civil service-style benefit  in return for their 4 per cent contributions.

Chair statements can banish myths

With specific reference to the IGC reports, another misconception is that most people think that “value for money” relates to them – it doesn’t. IGC assessments of value for money are based on what IGCs think matters.

In fact, when asked what mattered to them (in a 2017 NMG survey), the vast majority of respondents said it was the outcome – the amount of money in their plan at claim.

Most people also think that if they give their money to someone else to manage, they will do so responsibly – wrong! ESG comes as extra: a bit like furry dice in your car.

If you want ESG as standard, then you will have to wait until one of the providers has the guts to move to a responsibly invested default, and if you are expecting your IGC to be helping you to spend your savings, you had better respond to the Department for Work and Pensions' consultation.

If IGCs want to get their chair reports read, they should focus on dispelling these myths and providing value-for-money assessments that actually correspond to consumers’ priorities.

To borrow Quietroom’s Vincent Franklin’s phrase: IGC reports are written too high up the ladder of abstraction. Instead of blandly assuring all parties are getting value for money, isn’t it time we started looking for losers as well as sinners?

If – as all statements set out by saying – the IGC is there for the policyholder, then policyholders should be getting more straight-talking. It is not beyond IGCs to produce personalised value-for-money statements in 2019. They should also be able to push this year for responsibly invested defaults and tell it like it is with regards to decumulation.

I am one of the IGCs very few fans and thoroughly welcome the overdue extensions of their duties. However, unless IGCs can tell their policyholders something genuinely interesting, they will continue to sound like an extension of the provider’s marketing departments.

Henry Tapper is chief executive of AgeWage