DC SPOTLIGHT
Electricity plantriumphs inAegonchargeschallenge
By Sophia Imeson
Trustees of the Electricity North West Scheme have succeeded in demanding Aegon reduces its fund charges for DC members after comparing the company’s fees against other investment providers in the market
A
egon has agreed to lower its fund charges for defined contribution members of the Electricity North West Group of the Electricity Supply Pension Scheme, after trustees
challenged the provider following a review of other players in the market. The decision comes at a time when increasing
regulatory scrutiny of pensions governance is making trustees think more carefully about how they assess value for members, and what they can do to improve value. The Pensions Regulator last year found that just
one in 10 small schemes and one in three medium schemes are meeting the watchdog’s expectations on assessing value for members. This includes having good knowledge and understanding of the costs and charges paid by members. It also found that only 41 per cent of scheme trustees are researching and taking into account what members value. Trustees of the Electricity North West scheme,
however, seem to be doing all they can to ensure members are getting a good deal. The DC section’s latest chair’s statement, signed off on July 15, shows that they carried out a review of the section’s fund charges with Aegon in December last year. The trustee board compared against three other
investment providers and subsequently asked Aegon to review its charges. “The challenge led to Aegon agreeing to reduce
the charges for the Aegon BlackRock 40:60 Global Equity Index, Aegon BlackRock Market Advantage, Aegon BlackRock All Stocks UK Gilt Index, Aegon BlackRock All Stocks UK I/L Gilt Index and Aegon BlackRock Corp Bond All-Stocks Index,” the statement reveals. The reduction in these DC fund charges is expected to come into effect in autumn this year.
Looking at the wider market Lydia Fearn, head of DC and financial wellbeing at consultancy Redington, says schemes tend to review their provider at least every three years to make sure they are still suitable for the scheme. In addition, they might also carry out an annual light-touch review.
28 % 40 20 0 Micro Source: The Pensions Regulator Small Medium Large
Master trust
Total Charges are just one component of value for
money, and Ms Fearn points out that “it’s the value that the member’s are getting for the price they’re paying” that is important. Trustees should therefore think about what
members are paying, what they are getting from that in terms of value, “and how competitive that is in the open market”, she says. “You would expect that (and this doesn’t happen
all the time) schemes do speak to the provider and ensure that the price is as good as it can be for the service they’re getting,” Ms Fearn adds. Sometimes – if a negotiation is unsuccessful and
other providers look more attractive – trustees might decide to jump ship and make the switch. Earlier this year, the trustees of the Combined
Nuclear Pension Plan announced that they had dropped Prudential as their DC provider, after member-borne charges for its default and other options were rated “poor” in an assessment of value for members. “If we don’t feel we’re getting what we need from a provider, we will also look at the wider market,” Ms Fearn says. In terms of assessing value for members, there is
no denying that investment performance is crucial. But Ms Fearn says she would also like to see more focus on member engagement and helping savers
Majority of schemes regularly assess fees
Proportion of DC pension plans reporting that they assess annually that charges/costs represent value
100 80 60
Not many trustees would test the market or push back on the provider, but with increasing governance requirements more trustees are starting
to do that Maria Nazarova- Doyle, Mercer
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48
