The role of your IGC is to assess the Value for Money provided by Aviva to you, as workplace pension plan members.
Where we feel there are areas of improvement needed, we will challenge Aviva and ask them to make changes. Should we not be satisfied with their response to our challenge, we can escalate our concerns to Aviva’s Board, and, if appropriate, we can raise our concerns with the FCA.
We have expanded our assessment this year and now report on the following areas. For each area, we ask ourselves a key question, and ask Aviva to provide evidence to answer that question:
We also look at Aviva’s financial strength and sustainability, and the security of both your personal data and your money.
In previous years we have assessed the questions in each category separately and provided a rating for each. We no longer feel this to be appropriate as the vast majority of you are in currently marketed products. Instead, we have chosen to provide an overall view and explain where we believe improvements can be made or where more work from Aviva is required.
The vast majority of you benefit from regulations which require Aviva to cap your charges at a maximum of 0.75% per annum (or 75p for each £100 you have invested). In reality, most of you pay much less than this. Over two million of you pay less than 0.5%.
For those of you who don’t benefit from the charge cap, then by definition your charges will be higher. Aviva has taken some good steps to reduce charges for members in older, non-marketed products and following our continued challenge over the last 12 months, they have finally agreed to remove higher charging units for members aged under 55. This change has already been implemented for members over 55. This has come at a significant cost to Aviva and demonstrates their commitment to address the challenges we have raised. By removing these higher charging units, it also removes the exit charges associated with them which was our other area of challenge.
New rules to require providers to disclose charges will come into effect next year which will allow you to see all the charges relating to your pension.
Following our successful challenge, we want to see the changes made as soon as possible so that members aged under 55 see a benefit from the reduction in charges as early as possible. We have asked Aviva to undertake these changes as soon as is reasonably possible.
We would like to see an acceleration in the Customer Transfer Programme of members in older contracts into more modern contracts. This transfer will enable those members to access some facilities not available in older contracts and in some cases to also benefit from lower charges.
We’re happy that you are receiving a good service. Aviva has improved in all areas relating to both the speed and quality of service they provide to you. This is backed up by the feedback you have given them.
While there is little to be concerned about in this area, we do want to see Aviva maintain their upward trend in customer feedback and their downward trend in complaints. We also want to see evidence of their continued commitment to improving the customer experience and delivering digital capability.
Pensions are complicated. Aviva should be communicating with you in plain language and easy to understand terms to help you understand what your pension means to you. We are pleased that Aviva has improved a number of communications.
The annual statement you receive which explains your pension benefits has been simplified and shortened. Aviva has also reduced the length of a number of other communications to make them clearer.
We are particularly encouraged by the efforts Aviva is making to improve communications for vulnerable customers. This includes a review to ensure that they have simplified language, enlarged font sizes for customers with impaired sight, and that these are tested by customers to ensure these changes make a difference.
There is never an end to making communications clearer. The various forms of communication whether by paper or digitally need constant review and we expect to see a continued improvement in how Aviva communicates with you. We will be looking for an extension to the programme of improvement to vulnerable customer communications to ensure that all members receive clear, easy to understand communications which help them better understand and manage their pension.
We will be working closely with Aviva to ensure that the materials used to communicate investment pathways are fit for purpose and we have asked them for early sight of these, together with a clear plan for delivering the relevant solution.
Engagement has been difficult to measure, and we don’t believe this is unique to Aviva but is an industry-wide problem.
This is quite a wide-reaching question and can include things like:
How many members have an online account where they can check their pension value, undertake transactions and read important information about their pension?
How does Aviva ensure they understand the views of their customers?
We’re not completely satisfied that Aviva do enough to ensure members are engaged. We are encouraged by some of the commitments they have made to improve member engagement, but they need to do more.
The commitment from Aviva to undertake more customer research and more direct customer engagement is a great move forward. We will expect to see the results of this in a way that gives us the ability to understand member views.
Aviva can also improve the way they help to educate members. We have asked them to extend their financial education support to ensure that it is available to significantly more of you. They should do this through greater promotion of its availability and by improving online financial education content.
Whether you are in an older or more modern product, Aviva undertakes regular reviews to ensure your product is performing as it was designed to, and that the product features remain suitable. The IGC receives regular updates from Aviva on issues which have the potential to cause financial detriment or poorer outcomes. We believe the process is robust and fair, ensuring that where any financial loss is suffered by customers, they are fully compensated and put back into the position they would have been in had errors not occurred.
Over one million customers have now been moved from targeting an annuity at retirement to a more appropriate drawdown target, and members who previously had no access to pension freedoms have potentially had their outcomes improved by the launching of new investment funds to meet that need.
The IGC remain convinced that members in older products will benefit from a move to a more modern product with lower charges, a better investment proposition and a dynamic online experience. Aviva’s commitment to us last year that they would undertake a Customer Transfer Programme is starting to gain some momentum, but we want this to speed up. Their estimate that this could take 3-4 years to complete does not match our desire to see an improvement in the move from higher charges and a poorer member experience and we will be looking for a greater sense of urgency.
The launch of Aviva’s new default investment funds is a big step forward offering what is, in our opinion, a stronger default with a broader mix of assets which should offer a better prospect for growth. Equally, the launch of new funds for members in older products or changes to the outcomes to their investment target is a boost for a large number of customers. Investment performance for the year has been strong, and it is particularly pleasing to see that Aviva’s Stewardship funds have also performed well.
We believe that the “My Future Focus” default offers better Value for Money than the “My Future” default despite the slightly higher cost. It also offers stronger Environmental, Social and Governance (ESG) credentials. We would like to see Aviva doing more to encourage employers to select My Future Focus as their default and offer switches from My Future to this fund.
With the introduction in 2020 of investment pathways, we will be asking Aviva to demonstrate that their offering has been adequately researched and offers the best possible solution for members.
We are in little doubt that Aviva has strong ESG credentials. Employers are becoming more challenging of pension providers when selecting them to provide their workplace pension, both in terms of how they act as a provider, but also the investment choices available to them. The ESG factors considered in the My Future Focus default will go some way to providing employers with a stronger choice of default. Their Stewardship funds are now available to many more customers, and they also offer these funds in a lifestyle strategy which employers can select as their default fund.
Aviva has ambitious plans to deliver a wider range of climate friendly funds and we will be monitoring progress in this area. At present there is no ESG “tilt” in the My Future default fund in which the majority of members are invested, and we have asked Aviva to look at how this position can be improved.
