Press Release: IGC group value for money research study
Press launch held Thursday, 2 March, 2017 (London).
Last autumn a group of 11 Independent Governance Committees (IGCs), with the support of their respective UK workplace pension providers, jointly embarked on an extensive programme of member research, co-ordinated by law firm Sackers, to develop a common understanding of what members see as important when assessing value for money and why. The group now has the results of this study which, using workshops and an extensive online survey, identified and tested 23 attributes that members rated as important when considering value for money in their pension saving.
The organisations who collaborated on this initiative are Aegon, Aviva, Fidelity International, Legal & General, Old Mutual Wealth, Prudential, Royal London, Scottish Widows, Standard Life, Virgin Money and Zurich. NMG Consulting conducted the research study.
The key findings of the research are:
1. Perceptions of what value for money means focus around ‘good returns’:
In the online survey this was the top rated attribute; the workshops revealed this is much broader than investment returns but is perceived by members as achieving a good outcome at retirement, underpinned by the amount of total contribution going in and quality of the pension provision and member experience.
2. Members are not engaged with pensions but believe they are important:
There are gaps in member knowledge and misconceptions that impact member behaviours, including a reluctance to engage with pensions, but the majority of members perceive their workplace pension to be important for their retirement income.
3. Strong emphasis on the importance of trust and protection:
‘Controls & safeguards’ and ‘reputable financially strong pension provider’ are both highly rated attributes.
4. ‘Charges’ are not front of mind and are not in the top 10 attributes for the majority of members:
Providing they are in line with market average, charges are not a leading attribute. The workshops highlighted that members perceive the quality of the overall pensions experience and the end result are more important than a headline price in isolation. Members do not necessarily make the link between charging and a good return (although IGCs and providers fully understand its importance).
5. Education is highly influential in helping members understand how a good outcome at retirement can be achieved:
Once members begin to understand how to achieve a good outcome at retirement, they place more emphasis on support and engagement.
IGCs and their providers are considering these results, which are member perceptions and views (and therefore one component of an IGC’s/provider’s analysis of value for money), alongside their own views and professional judgements, on what is important for value for money.
Jacqui Reid, associate director at Sackers who co-ordinated the research study, comments:
“This ground-breaking study has produced some interesting and unexpected insights into how members perceive value for money when it comes to pensions. This project has great potential to inform industry, Government and regulatory thinking and help to improve member outcomes across the contract-based pensions landscape and beyond.
The research has led the group to conclude that education and ongoing support is vital for increased awareness and to create a greater sense of empowerment in members. There is a great deal of willingness to engage if misconceptions can be peeled away and gaps in learning filled. Members are also more likely to engage and consider saving more (producing better outcomes), if they are more confident about the security of their pension.
Improved perception of value for money by members will be achieved through more effective delivery of the key attributes. As ever, the challenge is engagement and this requires ongoing education and communication, which will need to be tailored, through personalisation and appropriate channelling of information and support (whether it be web, mobile app, letter or some other means), to be effective.”
Notes to Editors: In 2015 the Financial Conduct Authority (FCA) published its rules mandating that providers of workplace personal pension schemes should establish and maintain IGCs from April that year. Under the FCA requirements, IGCs must act independently of their provider. IGCs have specific primary duties to act in the interests of scheme members, to make an objective assessment as to whether members are receiving ‘value for money’ from their workplace personal pension arrangements and to report on their findings.
IGCs produced their first annual reports in March 2016, which had many common themes, including detailed work on investment performance, charges and service standards.
All IGCs (and their providers) are clear that value for money is about maximising good member outcomes. The challenge has been in pinning down the components of it and how you measure them. Many agree, although fair charges are important, there is much more to achieving good member outcomes than price. The role of IGCs is to act in the interests of their members. It is therefore important that they understand what members themselves, and not just the pensions industry, value to enable them to carry out their role effectively.
The research study contained two phases which comprised, a series of workshops with all-day focus groups of nearly 50 members which included discussions before and after targeted education, and an online survey containing more than 15,000 member responses.
David Burns, Partner
Sacker& Partners LLP (Sackers) is a commercial law firm whose entire focus is on advising the pensions and retirement savings industry. Widely viewed as a leader in the field, Sackers advises around 500 occupational pension schemes, as well as employers, providers of workplace pensions and Government bodies.
NMG Consulting is a leading global research and consulting firm focused exclusively on investments, insurance and reinsurance. NMG provides strategic advice to global financial institutions from its offices in Kuala Lumpur, London, Singapore, Sydney and Toronto. Click here for more information.