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Making IGCs relevantHow we would create a Value For Money assessment and use it to
present policyholders with meaningful analysis.
Henry TapperDirector First ActuarialFounder Pension PlayPen
Antonia BalaamDC ConsultantFirst Actuarial
Our credentials
Antonia Balaam
Founded 2004200 employee pension consultancyFCA permissions through Institute and Faculty of ActuariesActive in DC governancePartners Novarca in the UK
Henry Tapper
Founded 2013Due diligence for SMEsUsed by non-experts (accountants +payroll)Mass market28% owned by First Actuarial
As one on value for money
Measuring Value for Money“By Dec 31, Independent Governance Committees need to make recommendations to providers, & agree a plan, on value for money 4 pension savers” - Josephine Cumbo (via twitter)
What is Value for money?The overall Value for Money offered by a Pension Policy can be assessed by comparing the cost with the benefit to the policyholder.
Total benefits of Policy
Total costs of Policy
We’re on our own
What do we expect from a pension policy?• Funds to save into (and clear direction)• Policyholder support (helplines, online and paper-based)• Options to spend pension savings (pension freedoms)• Sustainability – capacity to deliver over time
What do we pay for an insurance policy?
What happens when you cheat?
Is the cost of Pensions Trust’s default 0.45% or 0.52% ?
How do we calculate VFM for services?
Services• What
services do members receive?
How important are the services• Weightings
of importance are applied to each of the benefit categories and to each of the services within that category
Fee comparison• The charges
are compared against the benchmark – 0.5% pa
Services offered to policyhold
ers
Weightings of
importance
Fee score
A way to compare?
A simple intuitive way of doing it?
Do insurer’s need an Origo for Governance?
Talking about value for money
Engaging – Educating –Empowering Policyholders
Problems with delivery
Who should we write the annual statement for?
Winning hearts and minds?
Conflicts• IGC members owe their appointments and their remuneration to the
providers – is this independent?• Company appointed members usually make 40% of IGC• Several members appear on multiple IGCs• Some IGCs are packed with former intermediaries • GAAs offer little choice
How seriously are IGCs taking their duties?Insurer Number of meetings so far Terms of Reference
(downloadableAegon 3 NO
Aviva 2 YES
BlackRock 3 YES
Fidelity NOT KNOWN NO
Friends Life 5 NO
Legal & General NOT KNOWN NO On request
Phoenix 4 NO On request
Prudential 5 YES
Royal London 3 YES
Scottish Widows 8 NO On request
Standard Life 6 YES
Zurich “numerous” YES
Source Lexis Nexis Occupational Pensions October 2015
Consistent reporting – but not like this
We deal in pictures….
What of the future?
LEGAL & GENERAL GROUP PLC
20Retirement Balance Sheet: Last Time
Buyers, Lifetime Mortgages• Chronic Shortage of UK housing• A third of retirees want to
move/rightsize• Only 2% of housing is built for older
people• Tailored housing needed in the right
places: Family, Friends, Facilities• Frees-up housing stock for families• Part of the care cost solution• For those who want to stay in the
family home, Lifetime Mortgages are a solution
• L&G entered this market in March and is now seeing £10m of applications per week.
LEGAL & GENERAL GROUP PLC
21
Pension Savings as “Slow Money” for Infrastructure
Media City, Salford, and L&G Investment
• Individual Savings are the basis of all institutional investment
• Recognised by Commissioner Hill’s Capital Markets Union…
• …and by George Osborne’s LGPS proposals
• Digital and Data can pinpoint where a saver’s assets are invested…
• ..for yield enhancement, local jobs and growth
LEGAL & GENERAL GROUP PLC
22
L&G: Long term direct investments
•We continue to drive risk-adjusted returns upwards through direct investments in long dated real assets where the banks have left behind ‘white space’. Investment in housing and regeneration are economically useful for us, for the broader economy and socially useful too.”
£15bnPlaces for people:£252m, acquiring 4,000 homes, building 7,000 houses, 50 year lease
Thames Valley Housing:£40m, 25 year facility enabling 500 affordable homes
Royal Liverpool University Hospital:£429m rebuild
English Cities Fundschemes in Liverpool, Plymouth, Canning Town, Salford and Wakefield: over 5.4m sq ft of mixed-use space, brownfield land
Transport and Logistics: £320m, maturities to 30 years
Aberdeen international business park:£127m investment, 335,000sq ft office space
CALA Homes:£210m investment (47% stake), further £200m for Banner Homes
Hyde Housing Group:£102m investment15 year facility
Sentinel Housing: private placement (registered social housing provider in Hampshire)
University of Southampton:£93m, 1,104 beds, 40 years income
Methodist Care Homes:£70m investment, 30 year lease
Media City, Salford Quays:£503m investment . 50% ownershipPRS Investment – 100s of new homes
£162m Leeds regeneration project: 200 acre mixed use site with potential for 7,000 homes
£400m Cardiff city centre redevelopment joint venture
£200m Bracknell regeneration partnership with Schroders
LEGAL & GENERAL GROUP PLC
23
Pensions Auto-Enrolment: Basis for Beveridge 2.0?
• “Europe accounts for just over 7% of the world’s population, produces
around 25% of global GDP and has to finance c.50% of global social
spending... It’s obvious it will have to work very hard to maintain its
prosperity and way of life”
• Angela Merkel, German Chancellor
*The Economist 1 June 2013. From the print edition
Polling shows 18-24 year-olds are increasingly likely to see welfare as a personal, not a State, responsibility.
Public-private risk-sharing offers a solution.
For more informationFirst Actuarial have offices in Leeds, Manchester, Peterborough, Tonbridge and Basingstoke
First Actuarial – www.firstactuarial.co.ukPension PlayPen – www.pensionplaypen.com
Henry Tapper- www.henrytapper.com
[email protected]@henryhtapper 07785 377768
