Aegon is critical of FCA plans to extend the role of IGCs in relation to the new investment pathways.
The pension provider says it does not think IGCs should have an “executive” role in relation to these pathways, which from next summer will be offered to customers who enter drawdown without advice.
However it is “broadly supportive” of plans to extend the remit of IGCs to take environmental, social and governance (ESG) factors into account, as part of the wider stewardship of workplace pension funds.
Aegon’s comments were made in response to the FCA’s consultation paper: Independent Governance Committees: extension of remit. IGCs were set up in 2015 to challenge the value for money offered by providers to members of workplace personal pension schemes.
Aegon’s pensions director Steven Cameron says: “We remain unconvinced that IGCs have a necessary role to play in designing these investment pathways, or ensuring they offer value for money.
“However, any role they do have should be consistent with what they fulfil for workplace personal pensions. This involves challenging providers on value for money, including charges, customer service, the quality and clarity of communications, investments and security.”
Cameron says there is concern that the FCA proposals on investment pathways go beyond this and appear to cross the line into ‘executive’ responsibilities.
“Any requirement for IGCs to have assessed and effectively approved investment pathways before they are offered to customers, as well as on an ongoing basis, extends into product design.
“While providers may wish to consult with their IGC on such matters, we believe ultimate responsibility sits firmly with the product provider.”
He adds that if IGCs are to be given a duty of challenging the value for money of investment pathways, it’s important that the FCA sets out its expectations regarding pathways.
“A wide range of individuals with different attitudes to investment risk may opt for each of the four pathways, so the specific investment strategy can only ever represent a broad fit and can’t mirror individual attitude to investment risk.”
Cameron adds that Aegon supports the FCA’s other key proposal to extend the IGCs’ remit to consider environmental, social and governance issues as well as stewardship.
“The paper suggests ongoing work between the FCA and the Pensions Regulator could lead to more prescription on how to assess value for money.
“One of the main successes of IGCs has been their ability to tailor their assessment of value for money to their provider and customer base, so we must make sure any additional prescription doesn’t detract from this.”
