MPs have grilled auto-enrolment pension providers over their investment performance, highlighting the poor three-year figures from Now: Pensions, and criticising providers for not focusing more on delivering returns to investors.
MPs at a Work and Pensions Select Committee last week, chaired by Frank Field MP, quizzed representatives from Nest, The People’s Pension and Now: Pensions over the extent to which they benchmarked their investment performance against their peers and the level of focus they had on delivering strong investment performance.
Nigel Mills MP pressurised Now: Pensions over its performance, which has been below the level of all other providers over the three years to June 2018. Reading from a list of annualised performance data, he said: “Nest 11 per cent. People’s Pension 9.9 per cent. Legal and General 10.8 per cent. And then I see Now: Pensions has 3.1 per cent. Mr Boulding, what has gone wrong?”
Now: Pensions director of policy Adrian Boulding said: “The Now: Pensions return over the short term is lower than the others because the trustees took a decision to currency hedge, with a view that they did not want to expose the members to currency fluctuations. Over that particular period we have been through the Brexit vote. The pound has gone down considerably against the dollar and other international currencies. So over that short-term, yes our members would’ve been better off if the trustees and decided to expose them to the impact of currency fluctuations. But over the long term I think these things will even out.”
Mills also questioned whether The People’s Pension should be attempting to win business on the basis of its investment expertise rather than its functionality.
He said: “looking at The People’s Pension’s literature, it gives nine reasons to recommend them as a provider. Not one of them is that we invest the money quite well and will give the stuff I got pension. You are saying come to us because we are cheap and easy to use, and not and maybe this would be a bit harder, you may get a better pension from us.”
People’s Pension director, policy and external affairs Gregg McClymont said: “In Australia all of the talk is now about red net returns, that is 25 years into the project. I anticipate that in the UK where we are now in year seven, that conversation will grow. As the pots grow, the focus towards investment return will grow, but you are right that we have been focusing on procedural matters.”