Recent research by ShareAction found that millions of UK workplace pension savers may not be getting the best value for money.
Independent governance committees (IGCs) are charged with protecting the interests of millions of UK savers. Since 2015, all workplace pension providers have been required to appoint these committees, who would ensure providers were keeping costs down for consumers, as well as holding them to account.
Last year, the Financial Conduct Authority postponed its own investigation into IGCs, despite accusations that providers were over-charging pension savers. As a result, ShareAction conducted its own analysis of the annual reports published by the 16 largest IGCs. These reports are published every year under the rules of the FCA.
ShareAction is a charity who aims to make investing more transparent, sustainable, and better value for money.
They found that most IGCs were ineffective at protecting consumers. Approximately 12 million people in the UK save into workplace pensions under these 16 providers.
IGCs were given a score out of 19, based on a range of factors such as how they ensured value for money, and kept track of charges and investment performance.
The table below shows the scores for each provider:
|IGC||Score out of 19|
|Legal & General||14|
|Old Mutual Wealth||6|
According to Share Action, there was not one IGC who performed well in all aspects of the analysis. Reports were often described as “vague,” and there was a lack of evidence that the interests of savers were being protected.
Five of the IGC reports did not even include the charges levied on savers by the pension provider. Others did not offer reports on how well savers’ investments were performing. In addition, multiple reports made it impossible for savers to tell whether they were getting good value for money.
Catherine Howarth, chief executive of ShareAction said: “This research should be a major wake-up call for the FCA, with its mandate to make markets work well so that consumers get a fair deal.”
Perhaps it is time to change how the committees work. After all, they are appointed by the workplace pension providers themselves.
Fifteen out of the sixteen IGCs did not even have any members who were saving into a workplace pension; Royal London was the only provider to have one. Only four IGCs had members who have campaigned for consumers in the past.
The IGCs for Black Rock and Old Mutual Wealth came joint last with just six points out of a possible nineteen. The best IGCs were those for Aviva with fifteen points, and Legal & General and Standard Life both with fourteen points.
Unsubstantiated claims that savers were getting the best value for money, as well as not keeping an eye on costs and consumer charges, were some of the main reasons why IGCs scored poorly.
⇒ So what does this mean for your workplace pension?
As a consumer, you should be focusing on getting the best value for your money. It may be worth checking with your employer who provides your workplace pension.
This report must however be taken with a grain of salt. ShareAction are not an official regulator such as the FCA, and so the aspects of IGCs which they look into may be different, and therefore overly critical, compared to what the FCA might consider.
This should not put you off saving into a pension either, as they are still considered very cost-effective ways of saving for retirement. Even if you no longer want a workplace pension, there are still multiple different types of individual pensions which may be suitable. If you haven’t yet got a pension, here are 8 reasons why you need to start saving into a pension now, even if you’re only 18.