Scottish Widows is supportive of this initiative and hopes other pension providers will agree to develop a framework during 2016 for the research to be carried out.
The Scottish Widows IGC was set up in May 2014, ahead of the formal commencement of IGCs in April 2015, with the majority of members independent of the company*. An IGC’s primary role is to scrutinise workplace pensions to assess whether customers - those currently contributing and those who have stopped contributing - are getting value for money. Scottish Widows’ IGC believes a customer benchmark of providers will help establish fair value.
As a result of its recommendations published today, the IGC also reported that:
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Charges were capped at 0.75% for all auto enrolment schemes in April 2015, thereby introducing the new lower charges early for schemes with staging dates in 2016 and beyond; peaks in charges for customers saving in legacy products are capped at 1% of their fund in any given year, reducing the average charge below 1% for the policy term in many cases; and all exit charges are being removed
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Scottish Widows has agreed to communicate with customers with older products, bringing to their attention the availability of more modern products, while reminding customers of the value of some of the benefits only available in those older products
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An alternative to cash investments - which were producing low returns reflective of the low interest rate environment - has been developed to deliver a higher return for those seeking a low risk option
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There have been significant improvements in service standards over the course of the past year
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Scottish Widows will conduct customer research using an independent third party with findings to form part of the IGC’s value for money considerations over the coming year
Babloo Ramamurthy, the independent chair of the Scottish Widows IGC, said: “We believe Scottish Widows offers reasonable value for money relative to the market and is making what we believe are sensible efforts to continue to improve value for money in the future.
“We are comfortable Scottish Widows has designed investment options which are appropriate for its customers and has aligned its interests with those of its customers through its charging structure.
“Equally important is helping customers understand how to get the best from their pension. We were encouraged by the quality and nature of the support Scottish Widows introduced last year to help customers understand the new pension freedoms, and we are pleased it has earmarked substantial funds to develop a wider digital communications platform for employees, with enhanced supporting material for their employers to help customers engage more effectively with their pensions.
“There are, of course, areas where Scottish Widows and the industry as a whole can improve and we will continue to monitor and challenge where appropriate.”
Ronnie Taylor, Pensions Director at Scottish Widows, said: “We established our IGC well in advance of Government legislation, so were already well placed to respond quickly to meet the challenges it set us. We are working hard to make the pensions market work better for customers and fully embrace the ethos behind this independent governance.
“We are particularly supportive of the creation of an industry-wide customer benchmarking of providers which will give insight into what customers consider to be fair value.”
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