Penfold, the digital workplace pension provider, has come under fire from advisers for presenting employers with marketing that claims table-topping performance for periods it was not in existence.
Marketing material from the provider, which has been sent out to employers, says it achieved 10.8 per cent performance annualised between 2016 and 2021, even though Penfold Savings Limited was incorporated in November 2018, and was authorised by the FCA in May 2019. The BlackRock MyMap 6 fund it uses was launched in May 2019.
The three-year-old firm’s marketing material shows five-year performance figures that place it ahead of all rival workplace pension providers, with Scottish Widows in second place with annualised returns of 9.9 per cent, but it does not indicate that the performance is simulated or that .
The FCA Handbook COBS 4.6.6 (4) says information that contains an indication of simulated past performance must be based on the actual past performance of one or more investments or financial indices which are the same as, substantially the same as, or underlie, the investment concerned; and that the information contains a prominent warning that the figures refer to simulated past performance and that past performance is not a reliable indicator of future performance.
FCA rules also require communications and financial promotions to be fair, clear and not misleading.
The Penfold marketing document cites performance to September 2021, even though the document is dated June 2022, saying: “In the last year to 30 September 2021, the Lifetime Plan, achieved 19.03 per cent returns, with 10.8 per cent annualised growth over the last five years to 30 June 2021, once fees have been deducted.” It is not marked as for professional use only.
Penfold says the marketing material has been reviewed for compliance with FCA rules.
The Penfold marketing material refers to a Dean Wetton Advisory report, ‘Default Universe Comparison’, which contains a summary ranking Penfold first out of 14 workplace pension providers’ default funds. A chart on the first page of the report headed ‘Historic Performance’ states ‘…we consider the historic Penfold performance against its peer group’. The report, dated December 2021, goes on to label a table headed by Penfold with the note ‘measure of how well Penfold has performed over the last 5 years relative to its peers’. On the last page of the four-page document the DWA report mentions the fact some returns are simulated but does not specify that the returns of Penfold, the top performer in the research, are simulated, or that the organisation was established after the five-year period for which the table-topping returns are presented. The last page of the four page report summary says ‘Where historic performance was not available for the full five years we have used manager provided simulated returns’, however, this appears three pages after the prominent citation of Penfold being ‘1st out of 14’ relative to its peers ‘over the last five years’.
DWA says its report has not been created for external distribution to the public and the report has a disclaimer to that effect on it.
Corporate Adviser has been passed the material by a workplace pension client, following a direct approach from Penfold. The adviser has raised concerns that the marketing material includes simulated returns that potentially exaggerate the performance achieved by Penfold, as it includes 5-year performance figures, when the provider has only been in existence for just over 3 years, and two-and-a-half years of the period covered in the research referred to.
The adviser has questioned whether the lack of reference to simulated returns in the Penfold marketing material may mean the marketing material breaches FCA rules.
Penfold says all its marketing material goes through thorough review to ensure compliance with FCA rules.
The Penfold marketing document does not appear to include a warning saying it is for a professional audience only.
DWA says the report is for the governance of the Penfold investment strategies, and says simulated performance is regularly used to make comparisons with other default providers. It says this provides insight but does not override actual performance which is tracked in other reports. DWA says the reports are created for Penfold Governance.
Penfold was set up by Pete Hykin, Stuart Robinson and Chris Eastwood 2018. Penfold has raised a total investment of £8.5m from angel investors and venture capital firms, and has over 60,000 users.
Penfold head of risk Martin Kuzmicki says: “All marketing materials for Penfold undergo a thorough review to ensure compliance with applicable FCA rules in relation to their intended audience, including presentation of past performance, whether actual or simulated.”
DWA managing director Dean Wetton says: “It is usually necessary to have longer term performance numbers to better understand the nature of the risks involved and we have used simulated performance where track records are less than 5 years and this is understood by all involved so it has not been necessary to ensure prominence of the simulated statement. The simulation is pretty straight forward with the underlying investments in this case as they are formulaic and use passive underlying components so we are comfortable that the simulations are representative of what historic performance and risk would have been. We regularly use simulated performance to make meaningful comparisons with other default providers too, this is particularly relevant where Mastertrust are increasingly adding in ESG/impact strategies. This provides insight but does not override actual performance which is tracked within a different monitoring report.
“The reports we provide are for Penfold Governance, not external distribution and marked as such. I understand Penfold also sometimes use the material when having discussions with HR and Finance professionals about scheme comparisons, but they are not distributed to the public.
“So, we’re very comfortable that DWA have not engaged in a financial promotion and our reports are clear regarding simulated performance when read in context.”
Syndaxi director Robert Reid says: “This report from Penfold feels like a very confused piece of work. There is a confusing message over time periods – you have five-year figures, yet the underlying fund has only been running for three years, and Penfold itself has only been in existence for just over three years. I’d be surprised that a compliance officer would sign this off.”