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.
She said most of the schemes do not disclose doing this on their customer-facing websites.
“These providers are acquiring new customers at lightning speed thanks to auto-enrolment. They owe a duty to their members and customers to take active oversight of how assets are invested, and to communicate those strategies to their customers.
“There’s a vast amount of work to be done to restore some of the confidence, trust and understanding that is sorely lacking in the UK pensions sector.”
Adviser View
Keith Churchouse, director at Chapters Financial, said: “Many providers have a long-term strategy for profitability in this ever growing pensions arena and although ShareActions’ findings are not a surprise (and possibly a reflection of profitability targets before full anticipated volumes are reached), they are a disappointing reflection at a time when this market is due to grow significantly in 2016.
“With thousands of SME’s reaching their staging dates this year, I hope we will see scores improve dramatically.
“I also think that investment stewardship will become ever more critical to those who are saving for the first time via AE.”
Daren O’Brien, director at Aurora Financial Solutions, said in his experience a lot of insurers’ auto-enrolment platforms are simply a reworking of their old group personal plan platforms and so the poor performance outlined in the report isn’t surprising.
He said: “It’s particularly worrying when the auto-enrolment providers have had so long to get their propositions and platforms in place before launching that they are still selling employees short with a bad user experience.”
ruth.gillbe@ft.com
