Personal PensionMar 21 2016

Warning over ‘very troubling’ auto-enrolment market

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Warning over ‘very troubling’ auto-enrolment market

ShareAction has branded the current state of the auto-enrolment market ‘troubling’ and ‘uninspiring’.

Damning criticism from the group, which aims to improve corporate behaviour on environmental, social and governance issues, follows a report from the body in which it found not one auto-enrolement pension provider had managed to score half marks overall on its ranking system.

The report, which was the group’s inaugural work in the space, revealed Aviva took the top spot as best auto-enrolment provider.

However, Aviva scored only 39 out of a total score of 80.

Speaking to FTAdviser, ShareAction’s chief executive Catherine Howarth, said it was important to note that all of the providers, except the People’s Pension, scored over 50 per cent on at least one theme.

She said scores of well above 50 per cent were achieved on governance, transparency and accountability, and responsible investment themes including arms and climate change.

“If you took the best scores from each provider assessed, you’ve got the makings of a very respectable performance, which shows that it can be done.

“That said, these results paint a pretty uninspiring picture of how the auto-enrolment market is currently performing when it comes to accountability to members.

These providers are acquiring new customers at lightning speed thanks to auto-enrolment. Catherine Howarth

“Not a single scheme has chosen to put a member whose assets are invested in the scheme on its board. We see this as very troubling.”

Ms Howarth added alongside the shifting of investment risk from employers to members, as defined benefit schemes closed and defined contribution provision took over, the last decade has also seen a significant shift in the UK pensions market away from trust-based schemes towards master-trusts and insurance companies.

Trust-based schemes require one third of the board to be member-nominated, but with master-trusts and insurance companies there is no such requirement.

She added: “Having member representation at board level is a perfectly manageable thing to do, and would send a strong signal that a scheme takes the management of conflicts of interest and securing value for money for members seriously.

“This is particularly true with auto-enrolment, which sees people taking on investment risk without a proper understanding of how to understand or manage such risk. Today’s savers depend as never before on vigilance and conscientious stewardship of assets by those who run and oversee their schemes.”

Ms Howarth noted another widespread issue which prevented many of the schemes from scoring highly is that a number of them delegate responsibility for the stewardship of pension savers’ assets to external asset managers, without apparently overseeing and monitoring the quality of stewardship.