Money

Pension providers urged to confront national retirement shortfall



People are still not putting away enough for their pensions – and the industry must continue to tackle this challenge, says the author of an influential report looking at investment performance.

The fourth Prudential Independent Governance Committee (IGC) report considered the investment performance and transaction costs across £5.3 billion of funds under management in Prudential’s workplace pensions in 2018. Prudential is one of the UK’s leading pension providers.

The IGC, representing 215,000 members, highlighted the need to get more people paying attention to their pension savings, with Chairman Lawrence Churchill reiterating that it is  a “central challenge for the whole pensions industry”.

Churchill said: “There are some signs that members are taking more notice of their pension savings but there is much more to do here. Pension scheme communication and engagement remain the most difficult areas to get traction across the industry.’’

He said a recent FCA review cited that only 52% of consumers read their annual pension statement and he highlighted the prospect of individuals not having adequate income in retirement as an industry challenge.

“Our key focus in 2018 has been on the most popular investment choices of the members and the costs associated with investing in them. We have demonstrated that transaction costs had a negligible effect on net investment returns – an important finding given the level of concern across the industry”. 

Following its challenge that the range of investment choice was too wide for members, 40 funds were closed in 2018 as options simplified and those failing the IGC’s ‘value for money’ tests were eliminated.

It was noted that investment markets were particularly volatile in 2018 and greater costs could be expected as more asset allocation changes took place. However, the IGC reported the principal fund had transaction costs of only 0.03% compared to the estimated 0.07% reported last year.

Roddy Thomson, chief operating officer, M&GPrudential, said: “One of our core aims is to make investing for retirement as easy and secure for people as possible and we work closely with the IGC to continually improve member outcomes.

“Prudential works hard to ensure we consistently provide value for money, a broad range of investment options, clear and understandable communications and, thanks to significant investment in our transformation programme, greatly improved and accessible customer services. 

Churchill is a respected figure who set up the Pension Protection Fund for the UK Government. As well as being CEO of three insurance groups, he chaired the Raising Standards Quality Mark Scheme for the Association of British Insurers, and was a board member of the Personal Investment Authority and of the Financial Ombudsman Service. The independent FOS deals with complaints against financial firms.

He was also a board member of the Board for Actuarial Standards – setting technical and communication standards for actuaries. More recently, Churchill set up NEST for the UK Government to give people on modest incomes a pension provider specifically designed for them and also chaired the Financial Services Compensation Scheme, which protects policyholders if a financial services firm become insolvent.



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