Overview
Reflecting the concerns that employees are not saving enough for retirement and where they do save, pension schemes are overly expensive, the package of reforms is aimed at ensuring members are in schemes that are high quality and offer value for money.
Key to the proposals is the requirement that providers of workplace personal pension schemes set up and maintain Independent Governance Committees (IGCs). IGCs will have a duty to act in the interests of scheme members and operate independently. They will assess and, where necessary, raise concerns about the value for money of workplace personal pension schemes.
IGCs will need both Pensions and Investment expertise. Members need to understand investment charging structures, portfolio construction options and risk. For smaller firms using an outsourced Governance Advisory Arrangement (GAA), effectively a substitute for an IGC, the same expertise is required.
The FCA are concerned that where a GAA is used, minimum standards are maintained, there is no commercial conflict and depth of knowledge is maintained. Complyport is able to offer a GAA service to Platforms that in turn offer group personal pension arrangements to employers (through IFAs).
The Complyport GAA committee and Chair will be independent from the appointing firm.
Costs
The FCA estimated ongoing annual costs of providing such a service to small providers at between £70-170k for buying in the service and between £10-125k for supplying data.
At this level, margins will be under pressure especially when factoring in the FCA objective which, put simply, is to drive down charges. With margins under pressure, small providers may which to reconsider their position in the market (legacy schemes remain within scope). In considering a continued offering other facts are important including, relationship with intermediaries and clients.
Complyport
Complyport is able to offer a Governance Advisory Arrangement with tailored terms of reference at an estimated cost of £35,000 pa. (for the simplest of schemes). This will include quarterly meetings and reporting. Complyport believes it can further reduce costs where platforms pool resources. The GAA will be independent of any platform. The GAA will consider each group personal pension separately. However, platforms can be assured the rationale for decisions will be uniform across those using the service, thus creating a level playing field.
