CHAIR S ANNUAL REPORT: The PTL Governance Advisory Arrangement ( the GAA ) For St. James s Place (SJP) Workplace Personal Pension Schemes.

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1 CHAIR S ANNUAL REPORT: The PTL Governance Advisory Arrangement ( the GAA ) For St. James s Place (SJP) Workplace Personal Pension Schemes April 2016 Opinion on Value for Money Compared to many other GPPs the SJP proposition has a higher cost but this reflects that it is a high quality and all-encompassing service proposition, covering an approach to investment management and financial advice, as well as being a pension provider. Fees are higher than most other GPPs (where personal, face-to-face advice is typically not included in the fees), but they are at the lower than some comparable wealth management firm s fees. The range of funds is determined by SJP and how it is tailored for individuals is determined by the SJP Partner, under supervision by SJP. This offers individuals a higher level of governance compared to most other GPPs. Therefore, this may lead to a greater likelihood of more appropriate individual investment strategies for members. Given the nature of the total service for total charge model offered by SJP, the GAA are unable to offer an opinion on the overall value for money for members. However SJP send a survey to all their clients, and around 80% of responses received from clients with SJP pensions said they viewed SJP to be good or excellent value for money. 1. Introduction In February 2015 the Financial Conduct Authority (FCA) set out new rules for Providers operating workplace personal pension plans (called relevant schemes) to take effect from 6 April From that date, those Providers had to set up an Independent Governance Committee or appoint a Governance Advisory Arrangement whose principal functions would be to: Act solely in the interests of the relevant policyholders (i.e. the members) of those pension plans and to Assess the value for money delivered by the pension plans to those relevant policyholders. For the remainder of this report relevant policyholders are referred to as members. The FCA rules also require that the Chair of each Independent Governance Committee and Governance Advisory Arrangement produce an annual report setting out a number of prescribed matters. The PTL GAA was established on 6 April 2015, and has been appointed by a number of workplace personal pension scheme providers. This is its first annual report in respect of the workplace personal pension schemes provided by SJP. 1

2 SJP offer a distinct service to their clients compared to other pension providers. When a client engages with SJP they will receive: a range of investment wrappers (including pensions) Access to SJP s range of funds (which are overseen by SJP s Investment Management Approach, which includes extensive due diligence and governance over a range of independent investment managers from around the world, overseen by an investment committee which includes both independent members and is supported by independent consultants such as Stamford Associates ) Face to face advice from SJP advisers (known as Partners) who are covered by SJP s own guarantee that this advice will be suitable All these services are provided for within a single, total charge. While it is the GAA s responsibility to ascertain the value-for-money of SJP as a pension provider, by the very nature of this vertically integrated approach, it is not straight-forward to unbundle the charges relating to the various aspects of the overall SJP proposition to the client, nor is it strictly in the GAA s remit to assess in detail the value for money of the part of the proposition which are not directly related to SJP, the pension provider. Within their pension offering, SJP have marketed four different generations of Retirement Plans ( Series 1, 2, 3 & 4), each with their own charging structure. The SJP Group Personal Retirement Plans (GPRPs), specifically marketed as workplace pensions, were aligned to the first three series of pricing structures. In 2001 SJP formally exited the workplace pension market; therefore there is no Group version of the Series 4 Retirement Plan. SJP do, however, have a number of individual Series 4 pension plans which have been grouped together for use by employers, and thus fall under the scope of the GAA. Series 1 and 2 are traditional Capital/Accumulation Unit Plans, as was the nature of retirement plans in the market at that point in time. Series 3 was a single unit type structure with a bid/offer spread. Series 4 has a 100% allocation with no bid/offer spread and a single AMC, alongside Early Withdrawal Charges. Of all the SJP Group schemes, only the SJP Staff Scheme (a Series 3 scheme) is an Auto- Enrolment Qualifying Workplace scheme. As an employer, SJP contribute 10% of gross annual salary on a monthly basis to employees, increasing to 12.5% after 5 years service and to 15% after 10 years service. This is at the well above average employer contributions into workplace pensions and significantly more than the base requirements to comply with Auto-Enrolment. Under all the above arrangements, the member has access to advice provided by the SJP advisor (referred to as an SJP Partner ) with the advice guaranteed by St. James's Place. SJP Partners are Appointed Representatives of SJP Wealth Management, the advice arm of SJP. Partners are restricted advisers, advising only on the products and services made available by St. James s Place, including products from third party providers. For example, SJP Partners advise on a range of GPPs from providers across the marketplace. 2

3 For the purposes of this first year s report, the GAA will cover all four series of Retirement Plans in this section. The GAA operates under Terms of Reference, agreed with SJP. These are publicly available as shown in part 4 of this report. Overall assessment of value for money Value for money is necessarily highly subjective, meaning different things to different people over time depending on what they consider important at that time. What is clear is that it is a balance of cost versus benefits. It should be noted that there is inadequate publically available data for any pension arrangement from any provider to perfectly assess value for money in an absolute or relative way. We have, however, made our own assessment of costs and benefits of these workplace personal pension schemes. The GAA has assessed the aspects of value for money which are practical to apply to SJP. As discussed in sections 3 and 4 this encompasses the charges, communications, administration, processes, reviews, admissibility and other aspects controlled by SJP. In addition, it includes the elements provided by the SJP Partners who provide advice on behalf of SJP. The SJP proposition is a high quality proposition and the pricing reflects this. Given the nature of the total services for total charge model offered by SJP, the GAA is not in a position to offer an opinion on the overall value for money for members. However SJP send a survey to all their clients, and around 80% of responses received from clients with SJP pensions said they viewed SJP to be good or excellent value for money. Furthermore around 95% of clients said they have or would refer SJP services to others. 3

4 2. Statement on the credentials of the GAA The GAA was established by PTL. PTL is a specialist provider of independent governance services primarily to UK pension arrangements. Amongst other appointments we act as an independent trustee on several hundred trust based pension schemes and we sit on a number of IGCs. We have oversight or responsibility for in excess of 120bn of pension assets. More information on PTL can be found at All of PTL s Client Directors have been appointed to the GAA. More information on each of them, their experience and qualifications can be found at Dean Wetton is also a member of the GAA. Dean is independent of PTL. Information on his experience and qualifications can be found at PTL, its Client Directors and Dean Wetton are independent of all of the Providers participating in the GAA in so far as: They are not directors, managers, partners or employees of any of the Providers, or any company within their groups, or paid by them for any role other than as members of the GAA nor are they members of the share option or performance related pay schemes of any of the Providers nor have they been within the last five years They do not have a material business relationship of any description with any of the Providers, or any company within their groups, and have not done so within the last three years. Any potential conflicts of interest are recorded in a log and considered by the GAA in accordance with its conflict of interest policy. The members of the GAA are appointed by the board of PTL. The board are satisfied that individually and collectively the members of the GAA have sufficient expertise, experience and independence to act in the interests of the members of the Providers pension plans. 4

5 3. Value for money assessment framework for SJP The GAA has developed a framework for assessing value for money. In broad terms, the benefits offered to members by the workplace pension provider are assessed in three different areas. These areas are Investment, Member Communications and Support and Additional Factors. The assessment of the benefits as a whole is then balanced against the charges borne by members to reach an overall conclusion on value for money. The FCA has prescribed five specific features that the GAA must assess and these have been built into the framework described above. However, some of these do not directly apply in the SJP environment and we explain this below. The FCA requires the GAA to assess: whether default investment strategies are designed and executed in the interests of relevant policyholders whether default investment strategies have clear statements of aims and objectives whether the characteristics and net performance of investment strategies are regularly reviewed by the firm to ensure alignment with the interests of relevant policyholders and that the firm takes action to make any necessary changes Default investment strategy refers to the investment funds into which contributions are invested for members who do not select specific other investment funds from the range of other funds available. In SJP s case, the member directs the investment strategy from the range of funds available under the SJP Approach to Investment Management. This Investment Management Approach includes extensive due diligence and governance over a range of independent investment managers (both UK and global), overseen by an investment committee which includes both independent members and is supported by independent consultants such as Stamford Associates. The member s SJP Partner will guide and advise them through the process. The member pays a total charge for their SJP pension which reflects the total service they receive from SJP including the investment approach and holistic advice. As a result of the above approach, SJP do not offer a default fund. The one exception is the SJP staff scheme where the SJP Balanced Portfolio is used. The Balanced Portfolio has been created by SJP and is made up of an appropriate asset allocation across the same range of funds available to all members. The management of the funds are outsourced to external managers and changed over time, in line with the SJP Approach to Investment Management. 5

6 SJP is able to undertake substantive reviews of the characteristics and performance of the investment strategies, and we are able to assess this process. With the exception of the staff scheme, SJP s proposition, by its nature, does not have default funds. Each member has an individual portfolio tailor-made following discussions with their SJP Partner. For this reason it is difficult for the GAA to assess the performance for individuals as a whole or even the typical member. From a member s perspective, however, client specific reporting of their pension s performance is available and this can be discussed with their SJP Partner at any time to assess whether their investment choices remain appropriate and / or whether a change is required. Accordingly, the GAA has assessed SJP in relation to the areas it controls and has taken into account the individual investment advice provided within the fee. In order to reach fuller conclusions on value for money the GAA will be exploring the value of the overall proposition in particular looking at the net benefit of investment returns and the additional value offered by the ancillary services beyond the pension product such as service and advice. 6

7 4. Value for money assessment Name of Provider: SJP Contact address for questions or further information: Client Services, St. James's Place Wealth Management, 1 Tetbury Road, Cirencester, Glos, GL7 1FP Terms of reference: The terms of reference can be found at The GAA s opinion on the value for money delivered by SJP workplace personal pension schemes: 4.1 Benefits to members The GAA has considered the benefits delivered to members in a number of different areas Investment Evidence provided SJP have provided a complete list of funds used with assets in each fund, asset management fees for that fund, additional charges, fund performance and benchmark performance. In addition SJP have described the process by which these funds are governed, including the use of independent external advice and an independent review panel. SJP have described the process by which the SJP advisors ( Partners ) give members advice. This includes a framework for SJP Partners to offer this advice and how SJP monitors and guarantees this advice. For all cases where advice is given, it is backed by a guarantee which is that the St. James's Place Wealth Management Group guarantees the suitability of the advice given by its Partners (advisors). The one exception to this is SJP s own scheme which has a default investment choice which is designed by SJP for its employees. Members of the SJP staff scheme do have the option to self-select across the whole universe of SJP funds. GAA assessment and opinion As explained in Section 3, we have not assessed SJP in relation to the design and execution of default funds. We believe that the process adopted by SJP s Partners in relation to the periodic review of the characteristics and net performance of the investment strategies is acceptable in the context of their role and will provide some additional benefit to members. 7

8 We have not assessed SJP in relation to the investment performance and volatility of the available funds and their consistency with their objectives. As explained in Section 3, this is tailored for each member taking into account their particular circumstances. The range of funds is determined by SJP and how it is tailored for individuals is determined by the SJP Partner, under supervision by SJP. This offers individuals a higher level of governance compared to most other GPPs. Therefore we believe this is likely to lead to more appropriate individual investment strategies for members. SJP make changes to both the fund range and individual allocations for members Member Communications and Support Evidence Copies of member communications including welcome letters, annual statements, preretirement communications and benefit quotations have been provided. In addition, it should be noted that the typical SJP Partner will meet members face to face on a regular basis. This will allow SJP Partners to take into account market or member circumstance changes into account in a timely fashion. GAA assessment and opinion In our opinion, the face to face communications supported by written member communications are likely to be a positive benefit for members Additional factors Evidence SJP carry out the administration, and monitor the service standards. The GAA has seen evidence of performance against the target standards. If the agreed Service Standards are met, core financial transactions will be processed promptly and accurately. There are additional (financial or other) benefits to members by virtue of their membership of a SJP GPP in that the advice charges include guaranteed full financial advice. At retirement, an SJP Partner can advise members on drawdown or annuity purchase and this advice will continue into the retirement phase. Members can take one or more UFPLS from their fund or select flexible drawdown, without transferring to a different provider. Alternatively, members can arrange an annuity purchase with advice from their Partner, which is done through a 3 rd Party annuity provider (who SJP have completed full due diligence on), as SJP do not offer their own manufactured annuities. GAA assessment and opinion Members can access the full range of options at retirement, with an external transfer only required if an annuity is purchased. 8

9 4.2 Charges and direct and indirect costs borne by members Evidence The GAA have been given a schedule of charges for each of the 4 series of group pension plans. These include a range of fees including initial charges, bid offer spreads and varying initial allocations, and AMC s which include advice. Series 4 has early withdrawal charges which diminish over time and a level AMC. In addition, External Manager Charges are levied on a look through basis and range from 0.11% to 1% with a mean of 0.52%. Series 1 to 3 have an additional Administration Fee which varies by plan type. SJP have disclosed a sample reduction in yield figure of 2.4% in its marketing material which is consistent, if slightly higher than various scenarios of contributions in series 1 to 4. The SJP staff scheme limits all in charges to 0.75% for the default strategy and is therefore compliant with the charge cap. Transaction costs will also be borne by members, based on their underlying investments. SJP publishes details on its website in line with guidance from the Investment Association, and, like all providers, awaits further FCA Guidance on the calculation and disclosure of transaction costs. 4.3 Overall assessment of value for money Fees are consistently applied and are higher than most other GPPs (where personal, faceto-face advice is typically not included in the fees). They are at the low end of comparable wealth management firm s fees. In a lower returns environment the higher AMC s become a greater proportion of the returns. We understand clients are happy with the service and believe they get good value for money. SJP regularly surveys all its clients with the results of these very positively affirming this. In the 2016 survey around 80% of responses received from clients with SJP pensions said they viewed SJP to be good or excellent value for money. Furthermore around 95% of clients said they had, or would, refer SJP services to others. There is a benefit in the bulk purchase of asset management services which is passed on to members. As the fees reflect that it is a high quality and all-encompassing service proposition covering a distinctive approach to investment management and guaranteed financial advice, the GAA is not in a position to offer an opinion on the overall value for money for members. 9

10 5. Other matters 5.1 Concerns raised with the Provider by the GAA and their response. The GAA has not raised any concerns with SJP. 5.2 The arrangements put in place for members representation The following arrangements have been put in place to ensure that the views of the members can be directly represented to the GAA: The role of the GAA and the opportunity for members to make representations direct to the GAA will be communicated to members via their next annual statement and on the website. SJP will receive and filter all member communications, to ensure that this channel is not being used for individual complaints and queries rather than more general representations which may be applicable to more than one member or group of members. Where SJP determine that a communication from a member is a representation to the GAA, it will be passed on in full and without editing or comment for the GAA to consider. 10

11 6 Next Steps This GAA report is for the period up to 5 April The process of annual reports under the FCA requirements is ongoing and further annual reports will be required. If you are a member and have any questions, require any further information or wish to make any representation to the GAA you should contact SJP at the address shown in part 4. Colin Richardson Chair: PTL Governance Advisory Arrangement April