So the charge cap has been a benefit?
To members, it’s a benefit. What you’ve got to realise is that a personal pension, whether it be a group personal pension or just an individual, is member-directed.
A member can say: “I want that pension, I’ll happily pay that and I want to invest in this.” Occupational in a master trust world has a trustee or in our case an independently-chaired trustee board with a number of professionals on it. Their sole objective is to make sure that the members, even those that have stopped contributing, get the best deal they possibly can.
Take Standard Life. Their default fund for automatic enrolment has delivered 6.6% annualised over the last three years, according to corporate adviser John Greenwood’s figures that he worked with Punter Southall Aspire to compile. We delivered 11.7% annualised over three years, almost twice what the mighty “Staberdeen”, as we call them in Scotland now, can deliver. Is that value for money? It’s not just charges; it’s about what you deliver. We could offer the lowest cost workplace pension, but have the worst performing investment returns.
There are three things that will impact what you’ll get at retirement: how much you put in, what the charges are and how it performs. They are the things that we need to focus on as an industry. As you can see from the FCA, we’re still arguing the toss about what life companies should be allowed to charge. We’re shaking the tree ourselves quite heavily on that, saying: “Don’t wait for the outcome of an FCA investigation into fat cat life companies, come to Salvus. We’ve got 0.5% AMC today, or possibly less.”
There is a lot of regulation around, is that a benefit for master trusts?
We’ve got some draft regulations on the table. What we are accused of in the master trust world is not being regulated, but I challenge anybody to say that.
If you’ve picked up the Defined Contribution Code of Conduct, it’s 13 sections long. It’s hundreds and hundreds of pages of legislative requirements that we must follow. What they haven’t done is authorised it.
Now, it’s interesting because four years ago I was sitting with Andrew Warwick-Thompson, who’s no longer with the TPR. I said shouldn’t you just compile a list or a register? I’m sure he could have copied and pasted the FCA register and done something similar to put a register of all these workplace pension providers together.
Four years on, the DWP has some other ideas and we welcome this. We’ve not taken advantage of any loophole. Our parent company has a 30-year track record and is FCA-registered. Our administration business has a 32-year track record and is FCA-registered. Our key staff are recruited from the industry because of their expertise and experience, so in our book they are all fit and proper. But there is no register; no place you could go to find that out.
So I welcome what the DWP has come up with, just not the way they’ve rolled it out. The Pensions Regulator is putting out its draft consultation of its code of practice, which is what we need to understand what boxes we need to tick and exactly how we follow that process.
We don’t envisage having that until late April, possibly early May, yet we’ve got to submit an authorisation application by October. They need to pretty much pull their finger out and show us what the rules look like. We are guessing what the rules look like which is never a great plan, is it? But it’s what we’ve got to deal with today.
We are supportive of the authorisation regime. We were calling for it four or five years ago and TPR was saying: “No, we don’t have the mandate, we don’t have the resources.”
They now have the mandate. I couldn’t comment on what their resource increase is likely to be. 80-odd master trusts are going to submit an application for approval, pretty much on 1st October. Will they have the scale to be able to assess them all? And who do they tell first? Whoever they authorise first is going to have a commercial market advantage. It certainly should not be NEST, even though it is government sponsored. NEST should face the same scrutiny, and, in my book, they should announce us all together. We need to have a date where they’re going to publish the master trust A-Level results so that nobody has an advantage or disadvantage.
