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Providers' pension monitoring committees under fire

Providers' pension monitoring committees under fire

The effectiveness of independent governance committees (IGCs) has been called into question in a new report, which ranked providers' committees based on their quality and transparency.

ShareAction's report, Who Watches the Watchers? Transparency and Accountability in Workplace Pensions, published on Saturday (17 February), alleged a large number of independent governance committees were failing to achieve the key purpose for which they were created.

Basing its research on the annual reports published by the committees, as required by the regulator with a view to increasing transparency and encouraging comparison between providers, ShareAction found the committees had often made "vague" and "unsubstantiated claims" that savers' interests were being protected.

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The Financial Conduct Authority (FCA) deferred its full review into the committees in May last year saying work it had carried out with the Department for Work & Pensions found the committees had been broadly effective at implementing the recommendations of a previous review.

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. 

"Independent governance committees were a good idea but the FCA made the wrong call in abandoning indefinitely its promised review of their effectiveness."

Independent governance committees were established in 2015 to represent the interests of UK pension savers following a review by the Office of Fair Trading, which found lack of competition and poor governance at contract-based pension providers had led to consumer detriment, including overcharging.

The role of independent governance committees is to review whether savers are getting value for money from their schemes and to challenge pension providers to do better where necessary. 

The regulator is considering whether a similar requirement would be beneficial in the non-workplace pension space, as outlined in a discussion paper in early February.

The action group ranked the quality and transparency of the independent governance committee reports of 16 of the largest UK pension providers.

Aviva's independent governance committee (16 points) comes out on top of the ranking, with BlackRock's independent governance committee taking bottom place (6 points).

GC

Score (out of 19)*

Bonus points for innovation

Total

Aviva

15

1

16

Legal & General

14

1

15

Standard Life

14

1

15

Scottish Widows

13

0

13

Royal London

11

1

12

B&CE

11

0

11

Prudential

10

1

11

Abbey Life

9

0

9

Aegon

9

0

9

Phoenix Life

9

0

9

Fidelity

8

0

8

Virgin Money

7

1

8

Zurich

7

1

8

ReAssure

7

0

7

BlackRock

6

0

6

Old Mutual Wealth

6

0

6

In the ranking, independent governance committee reports were scrutinised on defining and assessing value for money; investment strategy and performance; management charges and investment costs; member communications and engagement; member service and administration; and consideration of long-term investment risks and opportunities, such as environmental, social, and governance factors.

ShareAction said in a number of cases, independent governance committee reports provided insufficient information to enable savers to understand the value for money they were getting.

Almost a third of independent governance committee reports reviewed by the group (five out of 16) did not state how much savers were charged by the providers of their workplace pension provider (Aegon, BlackRock, Fidelity, Virgin and Zurich).

Almost half (or seven out of 16) did not report data on how well savers' investments were performing (Aegon, BlackRock, Fidelity, Old Mutual Wealth, Phoenix Life, Prudential and Zurich).