To ensure that all products are performing as they should, and that they deliver the outcomes promised to customers, Aviva operates a robust product governance framework. This includes a regular review of all products which aims to ensure that customers are receiving the best experience throughout the life of their product and at retirement.
Where issues or risks are identified which might lead to a poorer than expected outcome, a team of product managers will ensure that any necessary improvements are delivered. This may involve small changes to product features, a reduction in charges, changes to product literature or, where necessary, payments to members to put them back in the position they should be in.
At the start of 2019, Aviva had identified 40 “risk events” which had the potential to impact their customers. Whilst this may seem many it should be noted there are a vast array of products and platforms and that these events affect only a tiny proportion of policyholders. We are pleased to see that by the end of the year, that number had reduced to 26. We have however raised our concerns with Aviva’s senior management that some of these risks have been outstanding for more than 12 months, although we are confident that when they are fixed, appropriate controls are in place to ensure that members receive the correct redress.
We are confident that the product governance process works well and are encouraged that 24 of the 26 risk events currently in place were identified by the company as part of their ongoing governance rather than as a result of a customer complaint.
Source – Aviva
One of the larger risk events identified by Aviva related to members who were still investing in funds targeting an annuity at retirement. Since the introduction of pension freedoms, there has been a significant fall in the number of people taking an annuity, choosing instead to take the option of drawdown, where they can access their money as and when they need it rather than taking a regular monthly income.
Throughout 2019, Aviva identified 150,000 customers who were in the de-risking phase (10 years from retirement) with investment funds targeting to match annuity pricing at members’ selected retirement age. They wrote to these customers explaining that their investments would be moved to a more appropriate drawdown outcome. The exercise to move these members was completed in 2019, and total assets of over £2billion were switched into new investments. Around 870,000 members who are not yet in their de-risking phase will now target a drawdown option when they are ten years from retirement.
We see this as an extremely positive outcome with a million members benefiting from what we believe is a more suitable retirement outcome.
We mentioned in our report last year that Aviva were looking to move customers in older products into more modern products with lower charges and better features. This programme has started, although progress has been slow.
As a result of the delays in the transfer activity Aviva’s Conduct Committee has now agreed to remove the impact of capital units for all workplace customers under the age of 55. In addition, Aviva will be engaging with around 100,000 workplace customers with smaller value pots (under £3,500) where higher charges represent a higher percentage of their policy value to encourage them to consolidate their pots.
One of the benefits of moving customers is that they will have access to improved features such as being able to access pension drawdown without the need to move to another Aviva product or away from Aviva altogether.
While the decision to remove higher charging units makes this work a little less urgent, we still want to see Aviva move quickly and will be receiving regular updates on progress. This programme is the main method for reducing the differential in pricing and value for money between older and newer contracts.
