Assessing The your Fidelity Independent Workplace ...… · IGC REPORT 2017 As Chair of the...
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Assessing your Fidelity Workplace Pension The Independent Governance Committee’s 2019 report Acting in your best interests
Transcript of Assessing The your Fidelity Independent Workplace ...… · IGC REPORT 2017 As Chair of the...
Assessing your Fidelity Workplace Pension
The IndependentGovernanceCommittee’s 2019 report
IGC CHARACTERS
FrontCover
Acting in your
bestinterests
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After reviewing these areas, and comparing them to the charges you pay, we have concluded that overall Fidelity offers you value for money.
The Independent Governance Committee’s 2019 report
Dear pension plan member
One of the key roles of the Independent Governance Committee (IGC) is to ensure that your pension plan provides you with value for money. This is assessed using the criteria set out in our Value for Money framework.
The Value for Money Framework
When assessing Value for Money, we use the following criteria:
• The level and quality of the service that you receive - your customer experience
• The effectiveness of your pension plan’s investment strategy
• The level and quality of benefits that you receive, compared to the contributions you make (improving inputs for better outcomes)
• The costs and charges that you pay
• The security of your investments
There are some areas where we think Fidelity has met or exceeded our expectations:
• There is a strong customer focus in Fidelity. The quality of interaction is good and where issues have previously been flagged by members and the IGC, process improvements over the past year have been made.
• Fidelity’s robust fund governance ensures that the funds you are invested in are closely monitored and perform in line with their objectives.
• There is a process in place to ensure default investment strategies are regularly reviewed to ensure they are appropriate.
• The charges are simple in structure and there are no exit charges if you choose to leave your Fidelity Plan.
IGC CHARACTERS
IGCTeam
David Rachel Kim Daniel Paul
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Assessing your Fidelity Workplace Pension
There are some areas that we will be working with Fidelity on in the coming year to enhance your experience:
• Continued monitoring of the changes being made to Fidelity’s systems, as well as enhancements to their digital experience.
• Making costs and charges easy to understand and collecting information on all investment costs from managers.
• Ensuring the way Fidelity engages with you about your pension is timely and relevant to your circumstances.
• Seeking your views on how we should make allowances for sustainable investment within the investment funds provided by your pension plan.
Where can I find out more?
We have created another short video for you this year, focusing on the results of our value for money assessment. You can watch this here.
All of our previous reports and videos, together with profiles of all the IGC members, can be found on our dedicated pages at Fidelity’s website, here.
How can I get in touch with the IGC?
We’re always happy to hear from you and we use your feedback to inform our conversations and proposed activities with Fidelity. If you’d like to get in touch, you can do so in a number of ways:
By email: [email protected]
By post: Fidelity IGC Chair, PTL, Park House, Park Square East, Leeds LS1 2PW
Kim Nash
Chair, Independent Governance Committee
April 2019
Don’t forget!You can check your Fidelity pension plan at any time using Fidelity’s online transactional hub, PlanViewer, where you’ll also find a wide range of tools and calculators, helping you to plan for retirement.
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As Chair of the Fidelity Independent Governance Committee (IGC), I am delighted to present to you our 2019 report.
Since 2015, every insurance company providing pension plans is required by the Financial Conduct Authority (FCA) to establish an IGC.
The IGC’s role is to:
• act in members’ best interests, and
• assess whether or not your pension plan provides you with value for money.
This report provides information on our assessment of Value for Money, as well as an update on the changes to your pension plan that we have been working on with Fidelity. We have structured the Report differently to previous reports and cover each area assessed under our Value for Money Framework. There is also a short video to explain our findings.
The IGC’s remit covers Fidelity’s Group Personal Pension (GPP) and stakeholder products
Each pension plan will be established to meet each employer’s requirements, with differing contribution amounts being paid in and often with different investment strategies.
To assess the Value for Money you receive from your pension plan, the IGC monitors the performance of Fidelity and those who manage the funds your pension savings are invested in, against the costs that you are charged by them. We use this information to challenge Fidelity to make improvements to their service or products where necessary or required.
As Chair of the IGC, I meet with the Directors of the FIL Life Insurance Limited Board (referred to as the Fidelity Board within this report) to set out the areas where improvements are needed and where we believe Fidelity is performing well.
The IGC is made up of five members, three of whom are independent of Fidelity. During the year one of the Fidelity nominated members, Julian Webb, stood down from the IGC and has been replaced by Daniel Smith. Daniel is Head of UK Full Service - Workplace Investing at Fidelity and is responsible for leading the overall management of Fidelity’s workplace businesses in the UK. Given Daniel’s role within Fidelity, he is in a position to ensure that the Independent Members are provided with all of the necessary support and information to undertake their roles effectively. Details on each member of the IGC and their skills and experience are included on page 25. For more information on the members of the Fidelity IGC and to understand a bit more about what we do, please watch this IGC Video.
Introduction
IGC CHARACTERS
IGCTeam
David Rachel Kim Daniel Paul
Kim
IGC CHARACTERS
IGCTeam
David Rachel Kim Daniel Paul
Rachel
IGC CHARACTERS
IGCTeam
David Rachel Kim Daniel Paul
David
IGC CHARACTERS
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David Rachel Kim Daniel Paul
Daniel
IGC CHARACTERS
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David Rachel Kim Daniel Paul
Paul
We look after the interests of
260,000members…
…with
£9.0 billionof retirement
savings…
…across
184different
pension plans
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Value for money
For a pension plan to offer good value we expect it to meet certain standards across a broad spectrum of activities. These standards are set out in our Value for Money framework. We review the features of the Fidelity pension plans against our expectations and set out where we think Fidelity is performing better than expected or where certain areas aren’t meeting our expectations. Member research was carried out in 2016 and this helped in the building of our framework.
In determining value for money the IGC assesses:
• The level and quality of the service that you receive - your customer experience
• The effectiveness of your pension plan’s investment strategy
• The level and quality of benefits that you receive, compared to the contributions you make (improving inputs for better outcomes)
• The costs and charges that you pay
• The security of your investments
A summary of our Value for Money framework is included later in this report in Appendix A and we provide details on customer experience, investment strategy, improving inputs for better outcomes and costs and charges within this report. There are no current actions related to security of investments this year.
We have concluded that taking all of these factors into account your Fidelity pension plan continues to offer you value for money.
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The IGC wants to ensure that you have a good experience when you deal with Fidelity, whether this is when you receive a letter from them, use their website or call them. If you have a positive experience, we hope that this will build trust in saving into your pension plan and improve your retirement outcomes.
The IGC is of the view that there is a strong customer focus in place within Fidelity. Service levels and the quality of interaction with members is generally good, and where it isn’t there is a process for improving the service provided, based on the feedback provided by you, the members. Our views on the various aspects of Fidelity’s service that contribute to our overall assessment of Customer Experience are described in the following pages. Overall, we believe that Fidelity performs well in this area.
We believe Fidelity has met or exceeded expectations in this area.
Providing relevant communications and support
Fidelity has focussed on improving the information provided to you, to help you make an informed choice about how much you should be saving and how to manage your finances in a joined up way.
Timely and relevant communications
Fidelity has launched a new member engagement program which sends communications that are relevant to your personal situation and driven by specific life events or decisions that you have made. This program is readily available but requires the support of employers. The IGC would like to see employers support and prioritise the roll out of this member engagement program to their staff, as we believe it has the potential to significantly increase members’ engagement with their pension. New employers establishing a pension plan with Fidelity will have this functionality set up as part of the pension plan implementation.
We would also encourage deferred members (those who no longer work for the employer whose plan is managed by Fidelity) to provide a personal email address so that Fidelity can keep in touch and make sure you benefit from this service, providing information which is more relevant to you.
Personal contact details, including email addresses, can be updated via PlanViewer (PlanViewer.co.uk) or by calling Fidelity’s Pension Service Centre on 0800 3 68 68 68.
Customer Experience
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Fidelity Retirement Guidelines
Fidelity has launched retirement guidelines which provide you with an indication, or rules of thumb, as to the amount of money you should be setting aside whilst you are working, in order to provide for your retirement.
We understand that every individual’s needs are different. However the IGC believes these saving guidelines provide a simple first step to help you better understand what you need to save for your retirement.
The IGC encourage you to review your retirement savings against the guidelines, to see if you’re saving enough, and consider increasing your contributions - even small amounts can have a big impact.
30 1x
2x
4x
6x
7x
Saving milestones to help you plan yourjourney to retirement
At age save of your annual household income before tax
Rules of thumb to answer four common retirement questions
7x 13%
4% - 5%35%
How much should I aim to have saved
for retirement?How much should
I be saving each year?
How much of my retirement savings should
I withdraw each year to make it last?
What percentage of my current income should I aim to have saved at retirement?
Further information can be found here
NB: The figures quoted in these tools use generic assumptions and estimations designed to give some
simple rules of thumb to help you look into your retirement savings journey and beyond. The figures are not
personalised to you. They’re based on average household incomes in the UK with typically two working adults and
two state pensions. The assumptions we use may not represent what actually happens in the future. The tools should, therefore, not be used as a detailed retirement plan or act as a replacement for professional advice.
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Access the financial wellness toolkit here.
SUMMARY OF KEY FINDINGS
Customer Experiencecont.
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Your broader financial picture
In our 2018 Report, we provided details of Fidelity’s financial wellness plans, taking into account your whole financial picture, rather than just pensions in isolation, and this work continues to be developed. Fidelity recognises that retirement saving is only one part of financial planning that you need to consider and is working with employers to roll out the financial wellness programmes to their staff. Members who no longer work for the Employer that originally provided the Fidelity pension plan, can still access the financial wellness tools and content at www.fidelitypensions.co.uk
The IGC is supportive of the work being undertaken by Fidelity in this area and believe that considering the whole picture of your finances will help you make better decisions about saving for your retirement.
Letters and statements sent to members
Throughout your membership of a pension plan, you will receive letters from Fidelity and also an annual benefit statement.
Last year we told you that the annual benefit statements had been revised to make them clearer. Since these revised templates have been released, Fidelity has been receiving feedback on these and are in the process of collating responses and prioritising future amendments. These include a further review of the wording to eliminate more jargon, particularly in respect of lump sum death benefits, as well as better signposting to existing supporting literature on PlanViewer.
The letters you receive from Fidelity are all being reviewed by a specialist team as part of a multi-year project, designed to rewrite and replace existing templates using plain English. Given the volume of Fidelity’s letter catalogue, this is a large piece of work that will run in to next year. When undertaking the review, they ensure that the language is clear and meaningful for members who are perhaps not so financially aware. The IGC will continue to receive updates from the team in charge, and provide an update to you in our next report.
Account access
Fidelity identified that telephone security was a source of frustration for some members, when calling to discuss their pension. Whilst the IGC recognises the need to keep your data secure, the process should not be an unnecessary barrier to members getting the information they need. To improve the process, generic information about your pension plan can be provided without going through the security process. Early indications are that call times, and the number of complaints, have reduced and customer satisfaction has increased.
Fidelity is currently looking at the PlanViewer online log in process to make this simpler, including the ability to automatically reset passwords. In mid-2019, Fidelity will be launching an app which will enable you to access your account on the go and use fingerprint login. The IGC is monitoring these developments.
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Additional Support for and alternative methods of communicating with members
The IGC wants to ensure that all members are able to access letters and other materials issued by Fidelity and the engagement tools available online. To do this there are a number of alternative ways that Fidelity tries to make information accessible to all:
• Subtitles will be added to all videos going forward
• Text documents are available in large print and braille
• Different media is used to portray messages. For example, there are videos and animations available online, and print material contains QR codes which allow the reader to access further information on the topic.
If you would like to receive any of Fidelity’s communications in an alternative format, you can call their Pension Service Centre and they will arrange this on your behalf. Fidelity is also making employers aware that different formats of communications are available so they are able to support their staff as well.
The IGC has been able to discuss Fidelity’s policy for working with vulnerable customers and the training that is provided to staff to support it, and is pleased that the policy appears to be working for the most vulnerable customers. The IGC are keen to ensure ALL customers are well looked after by Fidelity, and receive what they need even if they find it difficult to access existing communication materials.
Accurate Administration and reporting
Fidelity undertakes the day to day administration of your pension plan. The IGC believes that providing a timely and accurate service to you will ensure you have all the information you need to make informed decisions.
Service levels
We previously reported that Fidelity had challenges in dealing with an increase in the volume of work following the introduction of pension freedoms in 2015 and there had been a corresponding increase in complaints around delays. Additional staff were recruited into the administration teams and Fidelity also carried out a process review, introducing additional system automation to improve efficiency. Over 2018 service improved but performance against expectation for the provision of retirement quotes continued to underperform, due to a continuing increase in demand for quotations. Fidelity prioritised retirement quotes for those approaching retirement, which met service expectations, with the impact being felt by those who were due to receive ‘wake up’ packs 5+ years prior to retirement. Whilst delivered a little later than expected, these were still delivered within statutory set timelines. Further steps were taken by Fidelity which saw performance improve towards the end of 2018.
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SUMMARY OF KEY FINDINGS
Customer Experiencecont.
Dealing with your complaints
The IGC believes it is important to respond quickly and proactively to any member issues or complaints. If members are dealt with fairly and their experience of their complaints being dealt with is good, then it will improve their confidence in Fidelity and their pension plan.
The management of complaints has been improved over the period with complaints being dealt with by phone initially, rather than formal letter, and a shorter time period for responding to complaints. The IGC will continue to monitor the complaints process, working with Fidelity’s new complaints manager, to ensure it is meeting the needs of members.
Dealing with administration issues
As reported in previous reports, there is a rectification exercise currently underway, which impacts a small number of members with protected tax-free cash. It has been resourced through a separate team and therefore has not directly impacted service levels generally. The IGC are comfortable with the way in which this complex issue is being resolved.
External audit of administration processes
Fidelity is investing heavily in technology and automation in 2019, so the decision to carry out the external audit has been deferred until this work has been finalised. The IGC has asked Fidelity to review the position by the end of 2019.
Employer feedback
The IGC recognises that employers have a key role to play in ensuring their employees are saving enough for retirement and are engaged with their pension plan. The IGC believes that if employers have a positive experience of dealing with, and being supported by, Fidelity then this will enable them to better promote member engagement.
The IGC has met with a number of employers this year and the majority of the feedback has been positive. There are a couple of areas of feedback which the IGC will be considering more closely with Fidelity over the coming year:
• Making it as easy as possible for members to take their retirement benefits by ensuring a smooth process for the drawdown of their benefits.
• Encouraging the provision of personal email addresses by members, particularly for those without regular or any access to a work email address, so that they may to benefit from the enhanced member engagement programmes.
The IGC will continue to meet with employers over the course of the year to obtain further feedback. If any employer is interested in speaking to an independent member of the IGC then please do let your relationship director know or contact us directly using the details on page 28.
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As mentioned in the introduction, when an employer offers a pension plan, a ‘default’ investment strategy is set up for members who do not otherwise wish to make their own investment decisions and which aims to deliver good retirement outcomes compared with the contributions that members choose to make. It does this by striking a balance between aiming for investment growth and controlling risk.
Generally speaking, this means using investments that have greater potential for long-term growth, such as equities, when members are in the early and middle part of their careers. These are generally referred to as ‘growth assets’. It’s important to note that these investments also involve more risk, so they could potentially fall in value in the short term as well. As retirement gets closer, members are gradually moved into less risky investments, such as government bonds and cash to protect members from market volatility.
Employers can either design their own ‘default’ investment strategy with advice from an investment adviser, or they can select the default strategy provided and managed by Fidelity – FutureWise. The FutureWise strategy can be changed if needed when markets and regulations change. Fidelity understands that many members do not know what choices they will make at retirement until they get there, so the strategy also aims to be broadly suitable regardless of a member’s retirement choices. Over the year, changes have been made to FutureWise so that it improves the expected outcomes for members. Employer bespoke strategies may similarly have a broad suitability regardless of a member’s retirement choice or may target a specific retirement outcome (e.g. annuity, drawdown, cash).
Investment strategy
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We believe Fidelity has met expectations in this area
The IGC is not responsible for setting the strategy members invest in, but we monitor that default funds are regularly reviewed for their continued appropriateness for members, as well as monitoring all the funds that members hold and how they perform against their objectives. This covers employer-designed default strategies, FutureWise and all self-select funds.
On the following pages, we describe our views on the various aspects of Fidelity’s default investment strategy and approach to investment governance that contribute to our overall assessment of the investment strategy proposition. Overall, we believe Fidelity’s approach to investment governance has met our expectations in this area.
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SUMMARY OF KEY FINDINGS
Investment strategycont.
Good return on my money
Fidelity has a robust investment governance process, within which they review the performance of funds against their objectives and consider any concerns about the fund managers’ processes or personnel. The IGC receives this fund performance information every three months.
When there are concerns about performance, Fidelity will place a fund ‘on watch’ and will ultimately close it if performance does not improve or concerns about the manager are not addressed. The IGC is kept informed about any funds that are on watch or scheduled for closure.
The IGC believes that Fidelity’s fund governance is a key quality in their ‘value for money’ assessment.
There is more information about Fidelity’s investment governance process here and a report is issued quarterly on the findings from this process.
FutureWise - Fidelity’s default investment strategy
FutureWise is an automated investment process that invests a member’s pension account into a range of appropriate funds during their working life.
In our 2018 report we explained that feedback from investment advisers and Fidelity research showed that the level of risk for younger members in FutureWise could be increased. This would then improve expected outcomes at retirement thanks to the higher potential returns of the riskier investments. The increased risk could also lead to more volatility in members’ investments during the earlier years, but this was felt to be appropriate as younger members are investing for a longer period, so they have more scope to absorb shorter-term changes in fund values.
This analysis also considered the level of risk for members approaching retirement and decided to change the way that FutureWise moves into lower-risk assets (known as the ‘roll-down period) to reflect the greater potential volatility in the earlier years.
Fidelity engaged with the IGC when designing the new version of FutureWise and the IGC believes it represents an appropriate investment solution. Further information on the FutureWise strategy is included in Appendix B.
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Following consultation with the IGC, Fidelity launched this revised version of FutureWise for new plans from 1 July 2018.
Plans established before this date will be moved to the new strategy during 2019. Members in these plans will receive written confirmation by mid-2019 to explain how investments will be moved to the updated strategy. Please read this information carefully and if you do not wish to make this change, we suggest you review your full range of investment options and choose alternative investment funds or strategies.
Previous FutureWise Strategy Performance
Outlined in the table and graph below is the performance of the previous FutureWise strategy over the last 1, 3 and 5 years for different age groups.
Source: Fidelity International January 2019. Performance is gross of fees. Performance is based on an assumed retirement age of 65. 5 Year return figures for Ages 45, 55 and 65 are based on back-tests of the strategy’s underlying funds and investments. These figures do not include the impact of contributions. Past performance is not a reliable indicator of future results. The value of investments may go up as well as down and investors may get back less than they invest.
Previous FutureWise Strategy - Gross of Fees Returns to 31 December 2018Age
Ages 45 & 55
1 Year
-4.3%-2.6%2.7%0.7%
5.8%4.2%3.1%0.5%
4.8%3.6%2.4%0.5%
3 Years (% per annum)
5 Years (% per annum)
Age 65Inflation - Retail Price Index (RPI)Cash Fund
FutureWise Cumulative Returns over 5 years(Starting pot of £1,000)
£1,400
£1,300
£1,200
£1,100
£1,000
£900
£1,500
12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018
Ages 45 & 55 Ages 55 Cash Inflation
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Investment strategycont.
Further information on the revised FutureWise strategy and the changes that have been made can be found in Appendix B and a short video on FutureWise is here.
FutureWise Cumulative Returns over 5 years(Starting pot of £1,000)
Age 45 Age 65 Cash InflationAge 55
£1,400
£1,300
£1,200
£1,100
£1,000
£900
£1,500
£1,600
£1,700
12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018
Revised FutureWise Strategy Performance
Outlined in table and graph below, is the simulated performance of the revised FutureWise strategy over the last 5 years for different age groups.
Source: Fidelity International January 2019. Performance is gross of fees. Performance is based on an assumed retirement age of 65. The return figures for ages 45, 55 and 65 are based on back-tests on the strategy’s underlying funds and investments. These figures do not include the impact of contributions. Past performance is not a reliable indicator of future results. The value of investments may go up as well as down and investors may get back less than they invest.
Revised FutureWise Strategy - Gross of Fees Returns to 31 December 2018Age
Age 45 (Back-tested)
1 Year
-4.2%-3.7%-1.2%2.7%0.7%
10.2%5.9%4.2%3.1%0.5%
8.5%5.1%4.2%2.4%0.5%
3 Years (% per annum)
5 Years (% per annum)
Age 55 (Back-tested)Age 65 (Back-tested)Inflation - Retail Price Index (RPI)Cash Fund
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Employer-designed default strategies
With new innovations and changes in pension legislation, it has become increasingly important to ensure default investment strategy options are kept up to date and are suitable to invest in.
The IGC wants to make certain that default strategies designed by employers are kept under regular review, so Fidelity requires any employer establishing a bespoke default investment strategy option to receive an annual report from an investment adviser. There are currently 31 employers who have chosen to use their own default investment strategy option.
To help ensure that this is happening, Fidelity will contact these employers every year to ask for explicit confirmation that advice has been received, together with evidence of this advice.
If an employer is not receiving regular advice on their default investment strategy, Fidelity will move members into FutureWise, as it is governed and monitored on an ongoing basis to ensure it remains suitable and in line with regulations.
Older style defaults
In 2015, we asked Fidelity to consider moving members from older-style default investment strategy options into more up-to-date and appropriate alternatives. Work has been continuing on this project and it has been agreed that investments in these older-style default strategies that are not being regularly reviewed by an investment adviser, will be moved to FutureWise.
The project has taken a number of years to resolve given the regulatory and legal challenges in changing older-style default investment strategies. While Fidelity is now ready to make these changes, the uncertainty surrounding market conditions around the time of Brexit means that any transition will take place later in 2019. At this point, Fidelity will move assets from the previous version of FutureWise and older-style default investment strategies into the revised FutureWise. If you are affected by this transition, you will receive a letter explaining the changes and exploring the points you need to consider, so you can decide if this change is right for you.
Members who make their own investment choices
Some members choose not to invest in their plan’s default investment strategy option but instead make their own investment selections. The IGC still monitors the performance of all of these funds on a quarterly basis against the funds’ investment objectives as described earlier.
The IGC would like to be assured that members who do make their own investment choices, review those choices from time to time so that they can check that they are still appropriate for their retirement goals.
The IGC has therefore asked Fidelity to remind members regularly about the importance of reviewing their funds.
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Investment strategycont.
Responsible Investing: Corporate engagement and Environmental, Social and Governance aspects of investing
There are trillions of pounds invested in pension plans and products in the UK. Rightly, government and regulators are looking to trustees, pension plan managers and pension providers to ensure that this money is invested responsibly.
In the last report we noted that the IGC would be working with Fidelity to review, in particular, how environmental, social and governance (ESG) factors are included in the investment process.
There are a number of ways in which ESG can be considered in the investment process.
Firstly, the IGC wants to understand the level of corporate engagement investment managers have with the companies in which they are invested, and the extent to which they hold them to account for matters such as executive pay, board diversity, environmental and social matters. Such active engagement with companies is to be reasonably expected and the IGC received assurance from both Fidelity and BlackRock (a major investment manager that is used by many Fidelity clients and members) that they do have active engagement programmes.
Secondly, the IGC wants to know whether Fidelity or other investment managers are creating investment options which have a clear “tilt” towards companies that have a better environmental, or low carbon, record for example. Fidelity is currently exploring the feasibility of this as both a standalone fund available to members for self-select in the core fund range and as part of the revised FutureWise strategy.
The IGC has been undertaking further work alongside Fidelity and a third party company, to conduct analysis and assess where the Fidelity’s default option (FutureWise) stands from an ESG perspective; that is, how well does it score given the companies and other funds in which FutureWise is invested. Work has also been carried out to understand what the difference would be by adding alternative funds that focus on investing in companies with high ESG ratings and with low carbon emissions.
The analysis showed that the ESG scoring on the FutureWise was reasonable. There was a marginal improvement to the score if an allocation was made to an ESG specific strategy during the growth phase.
The IGC are evaluating the broader results of these findings and will be working with Fidelity going forwards to conduct more analysis. They will be taking into account several other important factors including costs, impact on investment returns and impact on investment risk, when evaluating the outcomes. The outcome of this review will be summarised in next year’s Report.
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Improving inputs for better retirement outcomes
The member research undertaken in 2016 highlighted a number of areas which members thought were important to have in their pension plan. This included the benefits of tax relief on their contributions, the level of Employer contributions and a desire to get as much money back as you put in. These aspects of a pension plan are not able to be influenced by Fidelity but we believe Fidelity should help you understand how your pension plan works, so you can make informed decisions. The IGC is working with Fidelity on improving the information relating to each of these points.
Ease of changing contributions levels
The IGC emphasises that contributions are the most important factor in achieving a good level of retirement savings. As mentioned in previous reports, the IGC would like you to be able to change the amount you save through PlanViewer (Fidelity’s transactional website, where you are able to manage your pension account). We continue to ask Fidelity to engage with employers to make this process as easy as possible, as any solution has to integrate with the Employer’s payroll and benefit platforms.
Ease of bringing in other pension pots
For some members, the ability to consolidate pension pots from different employer plans is important, particularly as they start retirement planning in earnest. The IGC would like to see that the process of transferring previous pension pots into your Fidelity pot, if it’s right for you to do so, is made as straight forward as possible.
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If you wish to change your level of contributions please speak to your employer’s HR Team.
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Costs and charges
The member research undertaken in 2016 did not suggest that members wanted low charges to rank above other features of pension plans. However, the IGC believes that the level of charges needs to be appropriate as costs and charges impact on your retirement savings over time. The IGC has reviewed the charges you pay as part of their Value for Money assessment.
The IGC believes that Fidelity’s fund charges are simple and transparent in structure, as all explicit costs are included within the ‘Total Expense Ratio’, quoted to you in the Investment Choices Guide and the Fund Factsheets. Fidelity’s fund charges cover the cost of investing your money as well as administration and communication services provided by Fidelity. All charge cap requirements have been met over the year.
There are no exit charges, so should you choose to transfer your funds away from Fidelity you can do so without incurring any penalty.
The IGC believes that this is a key area of quality from their Value for Money assessment.
Communication of charges
Previously Fidelity has received feedback that costs and charges are hard to understand as a percentage and so we have asked Fidelity to include an example of fees in money amounts on your benefit statements. The IGC will be working with Fidelity on how charges can be presented more clearly across all their literature.
Fidelity has produced a video setting out how costs and charges impact on your pension savings and the video can be viewed here.
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Transaction costs
While the process of making an investment is a relatively simple one for the member, there are many underlying processes and activities that happen in a fund if the manager is to meet the fund’s objectives. Stocks and shares are bought and sold, for example, and the process of buying and selling shares come at a cost, known as a ‘transaction cost’ which is made up of a number of elements.
Some of the cost is included in the Total Expense Ratio we describe on page 18. These are not taken directly from your account; instead the daily price for the fund is adjusted to reflect these costs. Therefore, if you contribute £100 to your pension account then £100 is invested to buy units in your chosen fund(s).
Transaction costs can include any or all of the following elements:
Costs such as broker’s fees, commission costs or stamp duty are specific and easy to identify. ‘Slippage’ or ‘swing pricing’ refers to any change in price that may happen between placing a trade and actually carrying it out. This can be much harder to quantify.
The Financial Conduct Authority (FCA) now demands far more transparency around all of these costs and requires all investment managers to provide the detail of these costs to trustees, plan managers and IGCs so that they can share the information with members.
Despite the FCA’s requirements, a number of managers are struggling to provide the information in a consistent and comparable format. Some progress has been made and Fidelity continues to work with its external fund manager partners to obtain this information.
Fidelity has provided transaction costs on their default investment strategy option, FutureWise. These have been calculated using the methodology stated by the FCA for capturing transaction costs (referred to as slippage methodology).
Included within Total Expense Ratio (TER) Not included in Total Expense Ratio (TER)
Brokers fees
Legal fees
Fund management charge
Commission costs
Trading fees Stamp duty
‘Slippage’ or ‘swing pricing’
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As members progress through their working life, both in the previous version of FutureWise and the current version, the asset allocation changes, through the use of different funds. Due to these changes in the funds used, different transaction costs apply at different ages. These costs have been calculated assuming a member retiring at age 65.
Currently the level of data available (using the FCA stipulated methodology) is still quite limited to make any form of meaningful comparison against other strategies. However based on the data that is available, the transaction costs of the component funds within FutureWise appear reasonable when compared to other funds in the same asset class.
Once we have a larger universe of transaction costs data, the IGC (along with Fidelity), intends to conduct a more comprehensive analysis of the data.
Costs and chargescont.
Previous FutureWise Strategy
Age Transaction Cost
Monetaryamount per£1,000 invested
Up to age 63
65
0.39%
0.26%
£3.90
£2.60
Revised FutureWise Strategy
Age Transaction Cost
Monetaryamount per£1,000 invested
Up to age 47
55
0.13%
0.34%
£1.30
£3.40
65 0.15% £1.50
Previous FutureWise Strategy
Age Transaction Cost
Monetaryamount per£1,000 invested
Up to age 63
65
0.39%
0.26%
£3.90
£2.60
Revised FutureWise Strategy
Age Transaction Cost
Monetaryamount per£1,000 invested
Up to age 47
55
0.13%
0.34%
£1.30
£3.40
65 0.15% £1.50
Previous FutureWise Strategy
Revised FutureWise Strategy
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IGC REPORT 2019
Support for the IGC
In the last report we raised concerns with the level of support provided to the IGC from Fidelity. Since the last report an internal team, including senior representatives from each business area, has been established to ensure information provided to the IGC is correct, thorough and timely.
We also have a relationship director assigned to the IGC to ensure actions are completed and Daniel Smith, Head of UK Full Service Workplace Investing, has accountability for ensuring the appropriate support is in place. This more formal process was only implemented early in 2019 and so we cannot provide comment on its effectiveness yet.
Fidelity are also in the process of recruiting a plan manager to provide additional support for the IGC.
IGC CHARACTERS
IGCTeam
David Rachel Kim Daniel Paul
IGC REPORT 2019
22
In carrying out its work, the IGC is interested to know how Fidelity compares to other providers in the market. Together with a number of other IGCs, we have taken part in benchmarking exercises in recent years.
The next planned benchmarking exercise is scheduled to be undertaken during the Spring of 2019.
One part of the exercise will be an analysis of provider practice and data in the following areas and will be carried out by an independent adviser:
• Security
• Engagement
• Investment
• Access
• Service
• Charges
A second strand of the exercise will concentrate on consumer satisfaction and will involve gaining input directly from members.
The results of this work are expected in the summer and will influence our work and focus in the second half of the year. We will report on the outcomes in 2020.
Areas of Focus for 2019
The IGC has met with the Fidelity Board and noted a number of areas where they wish to see improvement over the next year. These items are:
Platform developments and additional investment
The IGC has requested regular progress updates and the opportunity to input on two key areas of technology in which Fidelity is making significant investment:
• increased automation in their systems, to improve service for members.
• enhancing the digital experience for members, starting with the launch of a new app in mid-2019.
Benchmarking
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IGC REPORT 2019
Making any charges that you pay easy to understand
The IGC wants to ensure that you are aware of the level of costs and charges that are deducted from your pension plan. We will be working with Fidelity to provide costs and charges in money amount terms rather than percentages, and looking at ways to share transaction cost information in a way that allows you to make meaningful comparisons between different funds.
Taking your money at retirement
The IGC believes that as pension savings grow, more members will choose to draw on their pension savings through regular or ad-hoc payments (known as flexible access or income drawdown). The IGC wants to make sure that you receive guidance when making these decisions and that the transition into retirement is smooth. The FCA has published a report on its findings from their review of retirement outcomes in light of the new flexibilities introduced in April 2015. The FCA is currently consulting on how the issues identified can be resolved. The IGC will ensure Fidelity take into account any output from the FCA to make the process of taking your benefits under drawdown easier.
Enhancing member engagement programmes
The IGC wants to see the revised engagement strategy programme rolled out to more employers so that members gain from the improved programme.
Through improvements to the engagement material and improving the experience of accessing online accounts, the IGC expect to see an increase in the registrations and use of PlanViewer and will be looking to Fidelity to provide evidence of this.
ESG
The IGC will be continuing to consider how ESG funds can be incorporated into both default investment options and self select options. A member survey will be undertaken to hear the views of members on incorporating ESG into investment options.
Areas to be progressed
The IGC will also be making sure progress is seen on the following areas:
• External audit of administration systems to be undertaken once changes to processes have been finalised
• Transition of legacy default investment strategies and old style FutureWise to revised FutureWise.
• Industry wide benchmarking is developed
• Fidelity response to pensions dashboard and how this can be facilitated.
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2424
Have your say
We want to take your views into account and over the year, have considered your feedback in the following ways:
• Independent IGC members have met employers as part of the client forums held by Fidelity, to hear more about their experience of working with Fidelity and to discuss the feedback you have provided to them on your pension plan.
• Independent IGC members have also met directly with a number of employers to hear their views and to gain the views of their staff.
• We have taken into account the feedback you provided in customer satisfaction surveys after dealing directly with Fidelity.
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2525
Members of IGC and independent criteria
IGC CHARACTERS
IGCTeam
David Rachel Kim Daniel Paul
IGC CHARACTERS
IGCTeam
David Rachel Kim Daniel Paul
IGC CHARACTERS
IGCTeam
David Rachel Kim Daniel Paul
n Kim Nash • Independent Governance Committee Chair
Kim Nash is a Director at PTL Governance Ltd (PTL). She joined PTL in February 2012. Kim is a qualified Actuary and previously worked for Willis Towers Watson as an actuarial benefit consultant. Kim is able to bring her significant DC experience both as a Trustee and a member of a governance committee to lead the IGC to develop the value for money framework and make comparisons on Fidelity’s performance, against the wider industry.
n Rachel Brougham • Independent MemberRachel Brougham is Trust Executive at BESTrustees Limited. Prior to this, she worked at Mercer as a Principle for 26 years. Rachel has a wealth of experience in exercising independent and effective governance oversight of pension arrangements, either as a member of a pension fund trustee board, a company’s pensions’ governance committee or a pension provider’s Independent Governance Committee.
n David Felder • Independent Member
David Felder has over 30 years of experience working with pension funds in both the public and private sectors. He has worked for Morgan Grenfell (now Aberdeen Asset Management) and then Kleinwort Benson as Head of Fixed Income. More recently, David was Head of Investments in London for Daiwa SB Investments, a joint venture between two of Japan’s largest financial organisations, Daiwa Securities and Sumitomo Bank. David is a fellow of the Chartered Institute for Securities and Investment.
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IGC REPORT 2019
n Daniel Smith • Fidelity Representative
Daniel is Head of UK Full Service - Workplace Investing, leading the overall strategic and corporate management of Fidelity’s DC businesses in the UK. Daniel joined Fidelity in 2002 and has over 20 years’ experience in the corporate pensions market. Daniel ensures that the Independent Members of the IGC are provided with all of the necessary support and information to undertake their roles effectively. In addition he ensures that the IGC members have full access to Fidelity resources and are consulted on business strategy and change projects.
n Paul Mason • Fidelity Representative
Paul Mason joined Fidelity in 2008 and has over 20 years’ financial services experience. He has held a number of roles prior to becoming Director, Strategic projects. Paul is a Director of FIL Life Insurance (Ireland) dac, a Trustee of Fidelity’s Master Trust Board and a member of Fidelity’s Independent Governance Committee.
Prior to joining Fidelity, Paul spent 13 years with Lloyds Banking Group after he qualified as a Chartered Accountant with Deloitte.
You can find more information on the IGC in the Governance section on Fidelity’s website. We have also added a short video to explain the IGC role and to introduce the IGC members.
IGC CHARACTERS
IGCTeam
David Rachel Kim Daniel Paul
IGC CHARACTERS
IGCTeam
David Rachel Kim Daniel Paul
IGC REPORT 2019
27
Members of IGC and independent criteriacont.
Independence
PTL, BESTrustees and LawDeb are independent of Fidelity and are satisfied that they continue to meet the independence criteria set by the FCA. The FCA criteria are set out below.
Any potential conflicts of interest are recorded in a log and considered by the IGC in accordance with its conflict of interest policy.
The FCA independence criteria are:
• They or their representatives are not directors, managers, partners or employees of FIL Life (Fidelity), or any company within the groups, or paid by them for any role other than as members of the IGC, nor are they members of the share option or performance related pay schemes of FIL Life, nor have they been within the last five years
• They do not have a material business relationship of any description with FIL Life or any company within their group, and have not done so within the last three years (except as trustee of Fidelity’s Mastertrust).
Performance assessment
In addition to assessing the value for money provided by Fidelity, every year the IGC and Fidelity go through a performance assessment process to review the effectiveness of the IGC. Part of this process is a skills assessment to ensure that across the IGC we have a wide range of skills and experience that are complementary to each other and to ensure the IGC has sufficient expertise and experience to act in members’ interests.
Our assessment this year showed we have a broad mix of skills which are complementary and we are working on a succession plan to ensure this is maintained in future years.
We also consider how we have operated over the year and what improvements can be made to how we operate and interact with Fidelity. As a result of the review undertaken this year, we have identified some areas where we would like to change the way we work next year:
• Visit more employers to get feedback from employers and their members
• Attend member forums to understand members’ views
• Ensure the changes Fidelity has made to provide additional support to the IGC means the IGC have access to the information they need in a timely way
• Presentation of operational management information to be improved to cover wider areas of the business, including system changes
• Maintain IGC profile within Fidelity by meeting wider teams to provide wider understanding of how we assess value for money and the role teams play in contributing to this.
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IGC REPORT 2019
Thank you to all members who have provided feedback this year. If you have any feedback that you would like to raise with the IGC directly, we can be contacted on:
Fidelity IGC Chair PTL Park House, Park Square East Leeds LS1 2PW
IGC CHARACTERS
CharacterPresenting
Contact us
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IGC REPORT 2019
Appendix AValue for Money Framework
IGC Value for Money Framework
The IGC has established a Value for Money Framework which sets out the criteria that we would expect to be met in the provision of contract-based pension products by Fidelity, and the evidence that we look for when assessing whether the criteria has been met and to what extent.
The evidence is presented to the IGC through meetings of the full committee, or through its investment and communications sub-committees. The IGC also makes an annual site visit to the Kingswood office to see the administration and helpline functions at first hand, and meets with employers throughout the year in order to gain direct feedback.
Criteria the IGC looks for Evidence the IGC looks for
Accurate administration and reporting
Good quality administration which is both timely and accurate
Policyholders / Members are 100% invested at all times in most efficient manner
Robust administration processes, reviewed during annual visit to Kingswood office
Member feedback through Net Promoter Score surveys
Quarterly breach reports
Quarterly complaints reports
Internal quality audit and control
External audit
Performance against expected service levels
Robust process flow for investment of contributions
Good performance for contribution processes against expected service levels
Robust process flow for switching investments
Out of market risk cover for members
n Customer Experience
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IGC REPORT 2019
Criteria the IGC looks for Evidence the IGC looks for
Appendix AValue for Money Framework cont.
n Customer Experience cont.
Clear and understandable communications
Communications are clear and engaging
Clear and engaging content and presentation accessible in a variety of media
Member feedback through Net Promoter Score survey, and through member forums.
Feedback from Employers
Annual benefit statements are clear, well set out and engaging, providing information on costs and charges in monetary terms.
Online Tools Online functionality for members to access if they wish including modellers, tools and general education materials.
Information sent at the right time to aid informed decision making
Bespoke communications can be sent
PlanViewer is readily accessible, members are reminded that it is available, and it presents information clearly and intuitively.
Generic materials are readily available without the need to log in.
Engagement statistics for PlanViewer and responses to email campaigns
Feedback from members through Net Promoter Score surveys and member forums
Feedback from employers
Feedback from consultants
There is a clear member engagement and communication plan, including the ability to better target communications in terms of timing and audience.
A range of campaign material is available to employers to use with their own membership.
Communication consultant available if required to create a bespoke communication plan for the employer.
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IGC REPORT 2019
Appendix AValue for Money Framework cont.
n Customer Experience cont.
n Investment Strategy
Phone Support A helpline is available to members when needed
Quarterly reporting of helpline activity – numbers of calls, average time to answer, average time of call.
Suitable opening hours and able to resolve queries quickly
Direct experience of helpline during annual visit to Kingswood.
Criteria the IGC looks for Evidence the IGC looks for
Employer Admin - It is noted that if an employer is engaged with the scheme and finding it easy to run there will be some benefits to members due to resources within employer being more focused on pension provision as a benefit.
Employers have access to good quality management and governance information to support their own governance processes and so that appropriate decisions can be reached
Efficient auto-enrolment and workforce management systems and processes
Good quality quarterly governance reports
Quality support from relationship directors and clients administration managers
Feedback from employers, either through direct conversations or through Fidelity’s DC Client Forum.
Robust administration processes, reviewed during annual visit to Kingswood office
Feedback from employers
Access to range of funds Self select range is available and encompasses a range of funds in the principal investment areas (equities, bonds, diversified growth, and property)
Robust investment governance mechanism around the choice and maintenance of self-select funds on platform
Quarterly Investment performance for all funds on platform
Ability for members to switch investments easily, and reporting on the same.
Clearly defined process for the removal and replacement of self-select funds as may be required from time to time.
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IGC REPORT 2019
Criteria the IGC looks for Evidence the IGC looks for
Appendix AValue for Money Framework cont.
Standard fund that needs no decisions
A default fund that is able to respond to changes in market and regulatory change without disruption to employers and members.
A default fund with clearly defined investment objectives and broad risk parameters
Robust governance processes around the management and ongoing suitability of the FutureWise default strategy.
Robust process for the management of changes to the FutureWise strategy as appropriate.
Robust governance processes around the management and ongoing suitability of the FutureWise default strategy.
Quarterly Investment performance of FutureWise.
n Investment Strategy cont.
Option to choose higher risk, higher cost fund
Responsible Investment
Full fund choice available
Investment managers have a programme of active corporate engagement holding companies to account for environmental, social and governance (ESG) related policies.
Members can access funds which reflect their beliefs around ESG.
Access to clear factsheets and related tools setting out details of investment choices.
Reporting from Fidelity and other investment managers on approach to responsible investment
Access to funds which are weighted towards companies with higher “ESG Scores” whether across the ESG range, or concentrating on one area in particular, eg low carbon.
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IGC REPORT 2019
Criteria the IGC looks for Evidence the IGC looks for
Appendix AValue for Money Framework cont.
Guarantee that will get back as much as I pay in
Good return on my money
There are no formal ‘guarantees’ provided but there is some protection against members losing own money
There is a review process for managing risk within FutureWise and risk profiles of other defaults are monitored by employer advisers
Syndicated research 2018 (Redington) which includes independent assessment of the FutureWise default
Investment performance provided quarterly
Investment Governance undertaken by Fidelity on objectives and risk measures
Analysis is undertaken on performance of funds over long term, risk measures and resulting member outcomes at different charging levels
Governance process around advised defaults is well defined and employers and their advisers are held to account for undertaking regular reviews.
Analysis of projected outcomes from FutureWise is performed by Fidelity and shared with the IGC
FutureWise is Fidelity’s governed default and information is provided quarterly on the performance of the fund against objectives
Performance of funds regularly monitored
A default strategy exists which targets a reasonable end outcome for policyholders and provides flexibility in how benefits might be taken
n Improving inputs for better outcomes
Employer pays in at least as much as I do
Communications reference the importance of paying more contributions and the level of contributions paid by the Employer
Communications provided are reviewed for impact by Fidelity and the IGC
Review tools including budgeting and expected outcomes are available to members
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IGC REPORT 2019
Criteria the IGC looks for Evidence the IGC looks for
Appendix AValue for Money Framework cont.
Easy way to change amount paid in
Simple to transfer old pension into current
Flexible options for how to take pension income
Tax relief on pension contributions
IGC is looking for functionality to allow further contributions to be made easily given the limitations of some employer payroll processes.
Monitor level of AVCs paid annually
Transfer in and out process is efficient and secure.
No barriers to exit
Flexibilities are offered by the provider and are made clear to members.
The benefits of tax relief and how it is provided are explained clearly to members
Policyholders should be able to make changes to contributions
Easy to transfer in and out of Fidelity to consolidate pots
Full range of retirement flexibilities offered
Members understand that tax relief contributes to their pensions savings
n Improving inputs for better outcomes cont.
Charges in line market
Transaction Costs
Charges should be reasonable and within industry ranges
Charges are transparent and easy for members to understand
Transaction costs are at a reasonable level compared to similar funds
Details of charges reviewed annually and as part of IGC benchmarking exercises.
Where possible costs and charges should be shown as monetary amounts.
Charging structures are reviewed regularly by Fidelity
Detailed reporting by Fidelity on transactions cost across all funds on the platform, noting the reliance required on external managers to provide necessary information. Particular attention is paid to the charges incurred in the FutureWise strategy.
n Cost and charges
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IGC REPORT 2019
Criteria the IGC looks for Evidence the IGC looks for
Appendix AValue for Money Framework cont.
Controls and safeguards
A reputable, financially strong pension provider
Provider has robust procedures and controls in place to manage operation risks
Both the number of errors and impact of errors are minimised
Members understand the security of their assets
The provider is durable and expected to be around in the long term.
The provider is committed to the UK DC market and prepared to invest in that business
Brand awareness exists to provide comfort to policyholders / members
Provider has scalability and considers resource management
Risk management process within Fidelity
A robust investment governance framework
Administration quality oversight
Feedback from employee benefit consultancies
Members always put back in place where they would have been had an error not occurred.
Complaints and breaches reviewed regularly, including root cause analysis.
Security of members’ assets is clearly communicated
Fidelity’s business plan is shared with the IGC at least annually.
There is a corporate risk control process in place which is shared with the IGC.
Fidelity’s business plan is shared with the IGC at least annually.
Review perception in the market place from consultants
Employer feedback
Fidelity’s business plan is shared with the IGC at least annually.
Resources planning within Fidelity is shared with the IGC
n Security
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IGC REPORT 2019
Appendix BPrevious and Revised FutureWise Strategy Breakdowns
The Fidelity Diversified Markets Fund was used for almost all a member’s time in FutureWise. It aims to achieve long-term capital growth while keeping volatility within a fixed range (6% to 8%). Although the fund does not have a benchmark, it aims to produce returns that are at least 3% more than a member could achieve from a cash savings account.
The Fidelity UK Aggregate Bond Fund was introduced less than two years before retirement. The small allocation to this bond fund aimed to reduce risk while producing capital growth and income.
The Fidelity Cash Pensions Fund was also introduced less than two years before retirement, with the aim of reducing risk and volatility even further.
Time to Retirement Date (Years)
Fidelity Diversified Markets Fund Fidelity UK Aggregate Bond Fund Fidelity Cash Pensions Fund
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%50 45 40 35 30 25 20 15 10 5 0
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IGC REPORT 2019
The revised FutureWise strategy is divided into two stages:
In the early and middle years of your career, the strategy will have a 70% allocation to the Fidelity FutureWise Equity Fund and 30% allocation to the Fidelity Diversified Markets Fund.
The Fidelity FutureWise Equity Fund invests in global equities as they have the potential for greater returns. It uses a ‘passive’ approach, which means costs can be lower, but the fund aims to perform in line with the market, rather than to seek to outperform.
The Fidelity Diversified Markets Fund aims to achieve long-term capital growth while keeping volatility within a fixed range (6% to 8%). Although the fund does not have a benchmark, it aims to produce returns that are at least 3% more than a member could achieve from a cash savings account.
When you are around 18 years away from retirement, the strategy starts to make changes to the investments it holds. This is known as the ‘roll-down’ phase and it is designed to reduce risk as you approach retirement, with the aim of looking after the savings you have already built up. During this phase, money is moved out of the Fidelity FutureWise Equity Fund and two new funds are gradually introduced:
The Fidelity UK Aggregate Bond Fund is introduced around 13 years before retirement. This bond fund aims to reduce risk while producing capital growth and income.
The Fidelity Cash Pensions Fund is introduced around eight years before retirement and is designed to reduce risk and volatility even further.
Appendix BPrevious and Revised FutureWise Strategy Breakdowns cont.
Time to Retirement Date (Years)
Fidelity FutureWise Equity Fund
Fidelity UK Aggregate Bond Fund Fidelity Cash Pensions Fund
Fidelity Diversified Markets Fund
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%50 45 40 35 30 25 20 15 10 5 0
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