Independent Governance Commitee says Prudential Makes Positive Strides In Embedding VFM Regime

11 March 2016

  • Independent Governance Committee Report concludes that majority of members are getting value for money
  • Investment strategy, charges, and service identified as key Value for Money issues
  • Action plan for improving value for money through 2016 agreed within first year of IGC formation

The inaugural report on workplace pensions, published today by Prudential’s Independent Governance Committee (IGC), highlights the actions that have been taken to embed the ‘Value for Money’ (VfM) regime.

The report, which covers Prudential’s contract-based defined contribution workplace pension schemes, looks specifically at three areas identified by the IGC in relation to VfM – charges, investment strategy and service – and concludes that most members are getting value for money for their pension savings with Prudential.

Charges

Following discussions between the IGC and Prudential, certain charges have been reduced across all of Prudential’s workplace Group Personal Pensions by an average of 15 per cent and, where exit charges applied, they have all been removed. Prudential has additionally gone beyond the scope of the IGC remit to also remove all applicable exit charges on trust-based DC schemes.

As a result many workplace pension scheme members will be paying lower charges from later this year.

Investment strategy

Identified as being the most important feature as far as the growth of members pension pots is concerned, the IGC examined a cross-section of default investment strategies.

For investment returns, the IGC prioritised actual outcomes as well as looking at forecast returns for an appropriate risk exposure in the design of default strategies. A reference point of Consumer Price Index plus three per cent over a sustained period was used.

The IGC has concluded that the default strategies are suitable and capable of delivering the outcome set.

Service

The IGC looked at how quickly and accurately member contributions were invested, if Prudential’s service standards were being met and how well Prudential deals with complaints.

Through its investigation, the IGC has concluded that, for the most part, it is satisfied with Prudential’s levels of service.

Lawrence Churchill CBE, Chair of Prudential’s Independent Governance Committee, said: “On the face of it, the concept of Value for Money appears straightforward. However, once you seek to set it out in writing and take account of what really matters, it quickly breaks down into a long list of criteria and variables.

“In our view what ultimately matters is the outcome for members, and I am pleased with the positive strides we have been able to make with Prudential, particularly in relation to charges, to ensure that members are getting value for money from their workplace pension savings.

“There is of course still further work to be done. Over the course of the coming year the IGC will look at the service and communications received by members, as well as where and how members’ money is invested to see if there is a requirement for Prudential to provide better value for money.”

Tulsi Naidu, Executive Director of UK & Offshore at Prudential, said: “From day one we shared a common focus with the IGC to deliver better outcomes for our customers. Working together we’ve made good progress and the removal of exit charges is a big step forward but clearly there is more to do in the year ahead. We’ve agreed with the IGC to widen our focus by looking at the service customers receive and by making communications easier to understand, and we have committed to finding ways to provide better outcomes for those customers.”

Focus for 2016

In 2016 the IGC will work with Prudential to focus on making communications to members easier to understand and more useful following the introduction of pension freedom reform in 2015.

The IGC will also continue to look at where and how scheme members’ money is invested, to identify if further steps can be taken to ensure VfM for members.

Notes to editors

A copy of the Prudential IGC Report on workplace pensions is available at: www.pru.co.uk/employers/autoenrolment/pru-igc/

Prudential’s IGC

The Prudential IGC has four independent members and two members from Prudential. It is chaired by Lawrence Churchill CBE. Biographies for each of the members, indicating their qualifications for their roles, can be found in Appendix 1 of the IGS’s report on workplace pensions.

Prudential’s workplace pension schemes

There are nine contract-based defined contribution workplace pension schemes operated by Prudential. Four of the nine schemes remain open to new employers and two of the nine schemes are available for auto- enrolment

Excluding Public sector AVC schemes, which are not in IGC’s remit, there are 276,000 members (314,000 policies) in Prudential’s workplace pension schemes. Of these,157,000 members (175,000 policies) are in contract based schemes and 119,000 members (139,000 policies) in trust based schemes. These trust based schemes have their own governance arrangement (not in IGC’s remit).

The funds under management for workplace pensions members within the IGC remit, total £3.4bn (£0.6bn of this is invested in Prudential’s With-Profits funds). 

Media contact

Darragh Leeson

020 7004 8081
darraghuk.leeson@prudential.co.uk

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