Assessing your Fidelity Workplace Pension - Acting in your best interests - The Independent Governance Committee's 2020 report - AWS
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Assessing
your Fidelity
Workplace
The Independent
Pension Governance
Committee’s
2020 report
Acting in your best interestsContents
Executive summary........................................................................................................... 3
Value for money................................................................................................................ 5
Investment strategy........................................................................................................... 7
Costs and charges........................................................................................................... 12
Customer experience..................................................................................................... 16
Improving inputs for better retirement outcomes....................................................... 21
Security............................................................................................................................. 23
Support for the IGC.......................................................................................................... 27
Have your say.................................................................................................................. 28
Members of the IGC and independence criteria....................................................... 29
Contact us........................................................................................................................ 33
2 IGC Report 2020Executive summary
Executive
summary
Dear pension plan member, When we assess for Value for Money, we use
the following criteria:
Welcome to your Independent Governance
Committee’s annual report for 2020. • The suitability of your pension plan’s
investment strategy
It’s been a full and busy year for us, and there • The costs and charges you pay
has been progress in many of the areas we • The level and quality of service that you
raised with Fidelity in our previous reports. receive – your customer experience
We’re here to work in your best interests, and • The level and quality of benefits that you
those of all members of Fidelity’s workplace receive, compared with the contributions
pension schemes, and to assess whether you you make (improving inputs for better
receive value for money from your pension outcomes)
plan. We do this using the criteria set out in our • The security of your investments
Value for Money framework (see separate You can find out more about each of these
Value for Money booklet). criteria in the summaries at the start of the
following sections.
The Value for Money framework
We are working hard on your behalf to assess After reviewing these areas, and
in detail the value for money you get from comparing them with the charges you
Fidelity. As we explained in our 2019 report, pay, we have concluded that, overall,
this year we have focused on monitoring the
changes made to Fidelity’s systems and the Fidelity has met our expectations and
developing digital experience, reviewing continues to offer you value for money.
how costs and charges are presented,
looking at the communications you receive There are some areas where Fidelity has met
from Fidelity and getting members’ views on or exceeded our expectations:
sustainable investment. • There is a robust procedure and controls
framework in place to ensure your funds
are closely monitored and your personal
data is secure
• The process for monitoring and reviewing
default investment strategies is working well
• Members are at the heart of Fidelity’s
offering and significant progress has been
made in improving service levels and
process automation over the year
IGC Report 2020 3There are also some areas where we feel To fill the spaces on the board, we ran an open
Executive summary
Fidelity has only partly met our expectations. recruitment process in conjunction with Fidelity
We will be working with Fidelity in the during the last three months of 2019 and have
coming year to enhance and improve your appointed Dianne Day and Gerald Wellesley.
experiences. These areas are: They bring a wealth of experience and
expertise to the board, and their appointments
• Clear communications sent to you at will allow us to continue to put your best
relevant times, so you can make informed interests at the heart of everything we do.
decisions about your retirement plans, with Welcome, Dianne and Gerald!
a particular focus on digital communications
• The availability of income drawdown There was also a change to the Fidelity
in retirement representation on the board, as Paul Mason
• Current contribution levels and how easy resigned from the company. Paul is replaced
they are to change by James Carter, Head of Pension Products
• Communicating about costs and charges in and Policy in UK Workplace Investing. James
pounds and pence has many years’ experience in the pensions
field and we have already benefited from
The Financial Conduct Authority (FCA) his contributions. Thank you to Paul, for all
announced in 2019 that our remit would be your support in the creation of the IGC, and
expanded from 6 April 2020. This means that in welcome to James.
2020 we will be taking a close look at:
• Fidelity’s policies on environmental, social, How can I get in touch with
and governance (ESG) issues within the IGC?
investment choices and default strategies,
We are always delighted to hear from
member concerns, and stewardship
members, and we will use any feedback
• The introduction of investment pathways in
you give us to inform our conversations and
retirement and how they will link to Fidelity’s
proposed activities with Fidelity.
default investment strategy, FutureWise
If you would like to get in touch with us, there
Where can I find out more? are a couple of ways you can do this:
We have made a short video that explores the
By email: FidelityIGCchair@ptluk.com
results of our value for money assessment. You
can watch it here. By post: Fidelity IGC Chair, PTL, Park House,
Park Square East, Leeds, LS1 2PW
In addition, you can also view last year’s report,
together with profiles of the IGC members here. We look forward to hearing from you.
Changes to the board
Two of our independent members left the
board during the year; Rachel Brougham in
October 2019 and David Felder at the end of
Kim Nash
March 2020. On behalf of the rest of the board,
Chair, Independent Governance Committee
Fidelity, and all our members, I’d like to extend
our grateful thanks to Rachel and David for April 2020
their tireless efforts on your behalf.
4 IGC Report 2020Value for money
Value for
money
Introduction To assess whether you are receiving Value for
Money from your pension plan, we monitor the
As Chair of Fidelity’s Independent Governance performance of Fidelity and the companies
Committee (IGC), I am delighted to present our managing the funds your pension savings
annual report for 2020. are invested with. This is done against the
We were set up in 2015, after the Financial criteria described in this report. We then use
Conduct Authority made this a requirement for this information to challenge Fidelity when we
every insurance company providing workplace identify ways to improve its service or products.
personal pension plans. We must have a As we finalise this report in late March 2020,
majority that is independent of the pension the coronavirus outbreak is having an
provider, so of our five members, three are impact on every aspect of our daily lives,
independent (including the Chair) and two are including our finances. We have checked
representatives from Fidelity. with Fidelity that your pension continues to be
Our job is to: well managed during this challenging time.
This includes answering your calls as quickly
• Act independently of Fidelity as possible and providing you with the up-to-
• Always act in members’ best interests date online information you need about your
• Scrutinise Fidelity’s Group Personal Pension pension investments.
and stakeholder plans, to see if they provide
members with Value for Money We can report that the restrictions we are all
having to deal with as a result of the pandemic
This report gives you our assessment of Value have not affected the administration of your
for Money, along with an update on the pension. As an international organisation,
improvements to your pension plan that we Fidelity has benefited from the experience of its
have been working on with Fidelity. offices in China, Hong Kong and Japan, which
were affected by the pandemic several weeks
At the end of 2019, the IGC was looking across prior to the UK. We do not yet know the long
185 Group Personal Pension and Stakeholder term effects of the coronavirus on the economy
plans, representing the best interests of 276,000 and investment markets, but will continue to
members with £8.3 billion of retirement savings. carefully monitor your Fidelity pension on your
behalf throughout 2020 and beyond.
Each pension plan has been established
by its sponsoring employer to meet its own If you would like more information after reading
requirements. This means there are different this report, or have questions or feedback for
contribution levels and often different us, please get in touch.
investment strategies being used, aiming for
different types of retirement provision.
IGC Report 2020 5Value for money In determining value for money, we assess:
Value for money
To be considered good value for money, we • The suitability of your pension plan’s
expect a pension plan to achieve certain investment strategy
standards. These standards are set out in our • The costs and charges you pay
Value for Money framework (explained here), • The level and quality of service that you
which was created with help from member receive – your customer experience
feedback. This enabled us to take your interests • The level and quality of benefits that you
into account. receive, compared with the contributions
you make (improving inputs for
We regularly check these standards to ensure
better outcomes)
they are still relevant and are stringent enough
• The security of your investments
to make certain you are getting the best from
Fidelity. We also review the features of Fidelity’s
pension plans against these standards, so we
Following our assessment this year, and
can see where Fidelity is performing well and after examining each of these criteria,
where it needs to do more. we have concluded that Fidelity has
met our expectations and continues to
offer you value for money.
The following pages explain how we have
reached our conclusions. When assessing each
section, we have looked to provide a view of
how Fidelity has done against the expectations
we had at the beginning of this review period:
• Not met – Where Fidelity has failed to meet
our expectations
• Partly met – Where Fidelity has met some of
our expectations, but we would like to see
greater progress
• Met – We are happy that Fidelity has
achieved the standard we expect
• Exceeded – Fidelity has out-performed
our expectations
6 IGC Report 2020Investment strategy
Investment
strategy
We expect you to have access to a good quality default fund, which is where your money will be
invested if you do not make an investment choice.
This could be the Fidelity standard default called FutureWise or it might be one designed by your
employer. We also want you to have a good range of other funds to choose from.
What we look for:
Investment strategy Standard fund that needs no decisions and is Exceeded
designed with the needs of members in mind
Investment objectives are set, reviewed regularly Met
and met
Option to choose higher-risk, higher-cost funds Met
Access to a range of funds Met
Responsible investment Environmental, social and governance factors (ESG) Partly met
Overall conclusion We believe that Fidelity provides access to a wide range of
good quality funds. FutureWise is performing well, and we are
satisfied with the robust governance that surrounds it and the
other (advised) bespoke default arrangements. We recognise
the work that Fidelity has undertaken around ESG and we are
particularly pleased with the response rate from our recent member
survey. However, there is clearly more to do in this space and we will
be focusing on that in 2020/21.
We believe that Fidelity has met our expectations in this area.
IGC Report 2020 7A good-quality default fund Objectives are being set and met
Investment strategy
FutureWise changes FutureWise
FutureWise is a default investment strategy that While we regularly review the performance
puts a member’s pension pot into a range of and suitability of FutureWise with Fidelity
appropriate funds during their working life. as part of our governance, we also sought
an additional assessment last year from an
Last year, we highlighted that Fidelity had independent investment consultant, Redington.
made some changes to FutureWise. These were Our aim was to see if there were any aspects of
applied in the first half of 2019 to all pension FutureWise that required further consideration.
plans that were established before 1 July 2018
and were using FutureWise. The investment consultant reviewed how
the strategy had performed in the past and
In the same report, we spoke about older- evaluated whether the strategy may deliver
style and bespoke default strategies. Where a good outcome in the years ahead based
an employer had established a bespoke on their in-house investment assumptions.
default strategy and was not receiving regular The analysis reviewed four stages in the
investment advice, we said Fidelity would glidepath of FutureWise against independently
move members using this default strategy into deemed criteria.
FutureWise. This allows Fidelity to ensure that
all members are offered a default investment • FutureWise scored well on the forward-
strategy that is governed and monitored on an looking assessment, as well as across all
ongoing basis to ensure it remains suitable and parts of the glidepath.
in line with regulations. • FutureWise also passed the backward-
looking assessment. This also involved
This project is underway and is due to be assessing the underlying funds within
completed later in 2020. If you are affected FutureWise against their benchmarks
by the transition, you will receive a letter
explaining the changes and the points you This independent analysis has helped
need to consider, so you can decide if it is right us conclude that FutureWise is meeting
for you. expectations. However, we will continue to
monitor the strategy on an ongoing basis
Members who have chosen their own taking account of regulatory, market and
funds and don’t have any assets in default economic developments.
investment strategies are not affected by
this move but will have the option to choose FutureWise performance
FutureWise if they feel it is suitable for their Although we’re not responsible for setting the
retirement goals. strategy that members invest in, we monitor
default funds and wider fund ranges to ensure
they are appropriate and perform well against
their objectives. This covers employer-designed
default strategies, FutureWise and all self-select
funds. Overall, we believe Fidelity’s approach
to investment governance has exceeded
our expectations
8 IGC Report 2020Over your working life, FutureWise takes what is known as a ‘lifestyle’ approach. In other words,
Investment strategy
during the early years of your working life, Fidelity invests your money in a way that has the
potential for long-term growth. When you’re closer to retirement, it aims to protect the value of
your savings by gradually moving your money into more cautious investments. With FutureWise,
this changeover starts to happen 18 years from your retirement date.
The table and graph show the performance of the FutureWise strategy over the last five years
for different age groups. As the strategy was revised in 2018, some of these figures are based on
underlying fund performance and back-tests, which we have highlighted below.
FutureWise strategy – Returns to 31 December 2019, gross of fees
Age One year Three years Five years
(% per annum) (% per annum)
25 20.0% 8.9% 10.5%
35 20.0% 8.9% 10.5%
45 20.0% 8.9% 10.5%
55 13.8% 6.0% 6.4%
65 8.4% 4.0% 4.3%
Inflation – Retail Price 2.2% 3.0% 2.5%
Index (RPI) *
* Included for comparison purposes only
FutureWise cumulative returns over five years (Starting pot of £1,000)
£1,700
£1,600
£1,500
£1,400
£1,300
£1,200
£1,100
£1,000
£900
31/12/14 31/12/15 31/12/16 31/12/17 31/12/18 31/12/19
Age 45 Age 55 Age 65 Inflation - Retail Price Index Bank of England Base Rate
Source: Fidelity International December 2019. Performance is gross of fees. Performance is based on an
assumed retirement age of 65. Three-year return figures for ages 45 and 55 are based on the strategy’s
underlying fund performance. Five-year return figures for ages 45, 55 and 65 are based on back-tests of
the strategy’s underlying funds and investments. These figures do not include the impact of contributions.
Past performance is not a reliable indicator of future results. The value of investments may go up as well as
down and investors may get back less than they invest.
IGC Report 2020 9Bespoke sections
Investment strategy
We regularly review the investment strategies We also want Fidelity to write to all self-select
of bespoke sections to ensure they have members every three years to remind them
been designed and executed in members’ of their investment choices and explain how
interests and have clear statements of aims important it is to keep the funds under review.
and objectives. Fidelity has committed to doing this through
the member engagement program, but
This includes assessing the performance of due to the slow roll out of the initiative, we
the strategies on a quarterly basis to ensure want Fidelity to issue letters to members until
the funds are performing in line with their a greater number of email addresses have
objectives and the design remains suitable. been collected.
We also challenge advice from the relevant
investment advisers for the schemes where Responsible investment
strategies are not designed as we would have FutureWise ESG analysis
expected (such as targeting an annuity at ESG stands for environmental, social and
retirement) and we ensure advice is provided governance. It is a way of looking at how
to the schemes on an ongoing basis. businesses work to see if they are socially
responsible. Last year, we explained how
Access to a range of funds and the we were working with Fidelity and a third
party to assess how FutureWise looks from
option to choose different funds
an ESG perspective; in other words, how well
While it is important to ensure the default FutureWise scores for the companies and funds
investment strategy is suitable, we believe it invests in. The analysis showed that it has an
it is also essential to have a broad range of average ESG rating.
investment options for people who wish to self-
select. We have reviewed Fidelity’s fund range We’ve now evaluated this analysis and have
and believe it offers: asked Fidelity to look at ways to improve ESG
integration across the strategy. It is currently
• A wide range of cheaper passive funds that considering how to make a meaningful
look to track the market difference without detracting from the
• More expensive options where fund strategy’s overall risk and return expectations.
managers are looking to beat the market Fidelity will provide us with regular updates
• A range of specialist asset classes, such as and is currently working with fund managers
ethical or socially responsible funds and others within the market to see how an
In addition, we will be working with Fidelity to improved ESG outcome can be achieved
ensure new funds are offered to all members for members.
of a pension plan, together with adequate Current approach to ESG and stewardship
choice in key areas, such as ethical and
As a fund platform, Fidelity delegates voting
responsible investing including Environmental,
decisions and engagement to the underlying
social and governance factors (ESG).
fund managers. This means that both Fidelity
We will continue to review the performance and the IGC expect managers to explain how
of all the funds available to members on a they engage with companies about ESG – and
quarterly basis to ensure they are meeting their carry out monitoring and engagement in line
stated objectives and providing value on a with their stewardship policies. We want to
net-of-fees basis. Any concerns will be picked know how they measure the effectiveness of
up with Fidelity for further review. the strategy while considering the long-term
financial interests of members.
10 IGC Report 2020In addition, we regularly speak with key fund Member ESG survey
Investment strategy
managers about their current position and We understand that many people have strong
future plans for ESG policies. This includes views about sustainable investing and ESG. In
managers from BlackRock and Fidelity, as January 2020, we sent out a survey with Fidelity
they offer the funds used by many members, to learn more about the aspects of sustainable
including those within the FutureWise strategy. investing our members care about and how
much the topic matters to them. We received
These meetings aren’t just an opportunity
over 4,000 responses across 109 pension plans
to understand the managers’ policies, we
administered by Fidelity. These told us that:
can challenge them too – and explore the
ways they measure success. We have found • 69% of members agreed that organisations
that both Fidelity and BlackRock are taking have a wider social responsibility than simply
steps to integrate sustainability and improve making a profit
transparency. This includes: • 33% of members would increase their
contributions if they knew their pension was
• Both are signatories to the UN Principles for
being invested sustainably
Responsible Investment and have A+ ratings
• 14% of members would be willing to
for ESG strategy and governance
pay more for a fund that invested in a
• Both have a dedicated team that integrates
socially responsible way. A further 32%
ESG into their core investment process and
were undecided
provides us with regular information about
day-to-day fund management We are currently evaluating the results of the
• Both are actively encouraging companies survey and will use this feedback to guide our
to disclose climate-related risks in line with engagement with Fidelity on the development
the Task Force on Climate-related Financial of ESG in the investment proposition.
Disclosures (TCFD) recommendations.
This includes operational plans in the event We see this as an area of improvement for
that the Paris Agreement’s goal of limiting Fidelity and will ensure there is more focus on
global warming to less than two degrees is including ESG options within the default and
fully realised self-select range.
Fidelity will also be collating reports on Extension of IGC remit
its voting and engagement policies to As a final point, in December 2019 the FCA (our
ensure managers are staying true to regulator) confirmed the formal extension of
their sustainability objectives – and it is our remit for oversight of Fidelity’s ESG policies,
working on providing the full sustainable so we can aim to ensure your investments are
investment policies of all fund managers on exposed to suitable ESG risks and opportunities.
the platform.
This will require us to consider and report on
While we are keen to ensure more the adequacy and implementation of ESG
transparency around company policies (including climate change), member
engagement, we also want enough funds concerns and stewardship. We will include
on the platform with an ESG focus, so we our views on how Fidelity and the underlying
can meet a wide variety of member views. managers have responded on these issues in
There are currently nine and Fidelity is looking our 2021 report.
to add more. In addition, it is exploring the
idea of an ESG tool that could help you see
how effectively individual funds are integrating
ESG and compare different elements of
ESG consistently.
IGC Report 2020 11Costs and charges
Costs and
charges
The costs you pay will affect your retirement savings over the years, so we want to make certain
that all charges are appropriate. This is why we check that Fidelity’s charges are in line with the
market and are reasonable when compared with similar funds.
What we look for:
Reasonability Charges in line with the market Met
Level of transaction costs Met
Overall conclusion: We believe Fidelity’s charges are reasonable. Indeed, in a recent
independent benchmarking exercise, Fidelity had one of the lowest
charges for their default investment option. There is a simple and clear
Annual Management Charge structure in place and there are no exit
charges, so you can transfer your funds away from Fidelity without
incurring any penalty if you wish to do so.
We would like to see costs and charges expressed as £ and pence,
as we believe this will help members understand them and we are
working with Fidelity to achieve this.
We did challenge Fidelity’s methodology for calculating transaction
costs and it has reviewed its processes in response to bring them in line
with other managers’.
We believe that Fidelity has met our expectations in this area.
Charges in line with market Included within the Transaction costs –
We thought it would be helpful to start with a total expense ratio Not included in the
definition of the charges that you pay: (TER) total expense ratio
(TER)
Total expense ratio: The main charge you pay Annual management Broker fees
to invest in a fund is the total expense ratio charge
(TER), which is applied to the value of your
Legal fees Commission costs
investment. For example, a TER of 0.20% means
a charge of 20p a year for every £100 invested. Trading fees Stamp duty
The total expense ratio combines the annual ‘Slippage’ or ‘swing
management charges and other expenses. pricing’
Transaction costs: Highlighted in the table on
the right.
12 IGC Report 2020As summarised above, we believe Fidelity’s Despite the FCA’s requirements, some
Costs and charges
charges are reasonable. Indeed, in a recent managers have struggled to provide the
independent benchmarking exercise, information in a consistent and comparable
Fidelity had one of the lowest charges for their format. However, further progress has been
default investment option. There is a simple made since last year and Fidelity continues to
and clear Annual Management Charge work with its external fund manager partners to
structure in place and there are no exit obtain this information.
charges, so you can transfer your funds away
from Fidelity without incurring any penalty if Transaction costs in Fidelity’s FutureWise strategy
you wish to do so. All costs and charges have a bearing on the
returns a member can achieve from their
Charges in pounds and pence – update pension investments. These costs have been
We believe it is important that you can calculated for the year to 31st December 2019
understand the costs and charges you pay and assume you retire at age 65.
and the impact they have on your pension
savings. That’s why we are disappointed that Fidelity’s FutureWise default strategy is
Fidelity has not made more progress towards made up of four underlying funds, with
showing costs and charges as monetary the investments in each fund managed by
amounts in their annual benefit statements and either Fidelity or BlackRock. These funds
other key communications. incur different levels of transaction costs.
The proportion of a member’s investments that
The Government and Regulators are also is invested in each fund will change as they
concerned about the transparency of costs approach retirement, so the amount they pay
and charges and they want annual benefit in transaction costs will also change over the
statements to be more consistent, shorter and course of their working life.
simpler in style. An industry-standard approach
is likely to be published soon, which is In our analysis undertaken during the year,
something we welcome. From 2021, we will also our review highlighted that one of the four
provide more information about the impact underlying FutureWise funds, managed
of costs and charges in this statement – and by Fidelity, was quoting higher average
we will continue to work with Fidelity to ensure transaction costs than the other three when
these developments are prioritised. comparing the level of costs to that quoted by
other pension providers. As an IGC, we wanted
to know why this was the case.
Level of transaction costs
Although it’s relatively easy for you to invest in a There are different ways in which transaction
fund, there is a lot going on behind the scenes costs can be measured, and consensus has
for a manager to meet the fund’s objectives. been reached across the industry on an
Shares are bought and sold, for example, approach that should be used. Among other
and this is where transaction costs come in. things, this approach includes measuring
They can be made up of several elements. ‘slippage cost’, which is the implicit cost
resulting from the difference between the
Costs such as broker fees, commission costs market price when an order is placed and the
and stamp duty are specific and easy to eventual execution price.
identify. ‘Slippage’ or ‘swing pricing’ refers
to any change in price that may happen The availability of the data that we need
between placing a trade and actually carrying investment managers to send us so that we can
it out. This can be much harder to quantify. calculate slippage costs has not been as good
as it should be, but it is gradually improving.
As we indicated in last year’s report, the
Financial Conduct Authority (FCA) now
demands far more transparency around these
costs. It requires all investment managers to
provide the detail of these costs to trustees,
plan managers and IGCs, so they can share
the information with you.
IGC Report 2020 13When Fidelity investigated the issue, they This is work in progress and we expect that over
Costs and charges
found that the higher costs were largely the coming year we will see further changes
due to the way slippage costs were being as a result of the FCA’s recent clarification
calculated for futures (Futures are financial of its policies. We welcome these changes
contracts committing a buyer to purchase an and believe they will help pave the way for
asset or the seller to sell an asset and have a a more meaningful comparison of funds’
predetermined future date and price), which transaction costs.
accounted for a relatively high proportion
of the assets in this particular fund. In this Fidelity has now provided updated figures
case, slippage for futures was calculated by for FutureWise transaction costs, which are
comparing execution price to the market price based on your age. This is because the
from the previous day. Given the significant asset allocation changes, through the use
difference in time, market movements had of different funds, as you progress through
distorted the slippage values, which in reality, your working life and invest in FutureWise.
were minimal. These costs have been calculated as at
December 2019 and assume you retire at 65.
Fidelity also found that some investment
managers were using different calculation Age Transaction In £ and
methods for such assets. As a result, they cost pence
have recalculated the transaction costs on Up to age 47 0.03% 3p per £100
FutureWise, and we are pleased that this has invested
produced more comparable figures, making it
55 0.03% 3p per £100
easier for members to compare our costs and invested
charges with those on other pension plans.
65 0.03% 3p per £100
As an IGC, we are comfortable with the invested
analysis that has been undertaken on this
Source: Fidelity, February 2020
issue but recognise there is still more work to
be done to assess value for money across all
funds. We appreciate that fund managers are FutureWise is a default investment strategy
going through a period of establishing how that puts a member’s pension pot into a
they can provide accurate transaction costs range of appropriate funds during their
for a range of assets, while complying with the working life. Fidelity has also provided figures
FCA’s regulations. for the transaction costs of the funds used in
FutureWise. These are a mix of actively and
passively managed funds.
FutureWise fund Asset class Aggregate transaction cost In £ and pence
Fidelity FutureWise Passively managed 0.03% 3p per £100 invested
Equity Fund equity funds
Fidelity Diversified Actively managed 0.02% 2p per £100 invested
Markets Fund multi-asset funds
Fidelity UK Actively managed 0.06% 6p per £100 invested
Aggregate Bond bond funds
Fund
Fidelity Cash Cash funds 0.00% N/A
Pensions Fund
Source: Fidelity, February 2020
14 IGC Report 2020All these aggregate transaction cost figures are Transaction costs for other funds
Costs and charges
either in line with or below the average for their Although some fund managers are still
asset class, with the exception of the Fidelity struggling to provide usable transaction cost
FutureWise Equity Fund which is marginally data, there are enough now doing it for us to
above the average transaction cost. Based carry out an initial analysis of the self-select
on this analysis from a third-party review, we funds offered on the platform. We have split
believe the transaction costs for the funds the funds by asset class (such as equity, bonds
used in the FutureWise strategy are reasonable and cash) as well as management style, so we
compared with their peer group in the wider can give you more detailed information. Just
market. We will be working with Fidelity on a to note, in the table below, 0.01% is the same as
framework for assessing transaction costs over 1p per £100 invested.
the coming year.
Transaction cost range
0.01% is the same as 1p per £100 invested.
Asset class Coverage Average 0.5%
(number aggregate 0.25% 0.5%
of funds) transaction
cost figures
Actively managed 59 0.26% 18 16 17 8
equity funds
Passively managed 51 0.02% 48 3 0 0
equity funds
Actively managed 15 0.07% 10 5 0 0
fixed income funds
Passively managed 12 0.02% 12 0 0 0
fixed income funds
Actively managed 27 0.17% 14 5 7 1
multi-asset funds
Passive mixed asset 6 0.05% 5 1 0 0
Property 2 0.05% 2 0 0 0
Cash funds 7 0.00% 7 0 0 0
Source: Fidelity, February 2020
Our analysis covers 179 funds from 26 different managers on the platform. As you can see, there is
a relatively large difference between different asset classes and management styles. We will be
working with Fidelity to assess the value for money provided by transaction costs for 2020.
IGC Report 2020 15Customer Experience
Customer
experience
We want you to be happy with your interactions with Fidelity, whether they are by letter, email or
telephone. This builds trust, which can encourage you to continue saving with Fidelity – or maybe
even increase your rate of savings. Remember, higher savings generally mean better retirement
outcomes for you!
What we look for:
Helping you make decisions Clear and understandable communications Partly met
and plan for retirement
Administration quality, Ease of administration Met
accuracy, and timeliness
Accurate administration and reporting Met
Net Promoter Score (NPS) Met
Contact points for members Online tools Partly met
and account accessibility
Phone support Met
Overall conclusion We have observed that Fidelity has a strong customer focus.
Service levels are generally good, with steady improvements
in the areas that had previously been identified as somewhat
weaker. That said, we do feel there is more it can do in the
education and engagement area of communications, and
Fidelity has several innovations under development to watch.
Fidelity continues to work on improving its services, based on
feedback from members, employers, pension professionals
and the IGC.
We believe that overall Fidelity has met our expectations in
this area.
16 IGC Report 2020Helping you make decisions and Technological change
Customer Experience
With so many members working remotely or
plan for retirement
flexibly, Fidelity continues to innovate, so it
We recognise there is still work to be done can ensure all members receive the same
on developing communications that are level of information in a way that suits their
timely, relevant to your needs and provided circumstances. For example, the augmented
in a media that will engage you. Fidelity is reality function in the Your Plan Explained and
working on a number of projects to improve Key Features documents provides a popular
communication and engagement tools, so it three-minute video – accessible by phone –
can make sure its communications are clear that highlights the key elements of a member’s
and engaging. We have highlighted some of pension booklet.
these projects below.
Fidelity is looking to use digital technology
Timely and relevant communications in other ways during 2020. In particular, it
We expect Fidelity to provide you with clear, will be targeting members who rarely have
concise and relevant communications and access to PCs during their working day by
support, when you need it. This year, we have using technology accessed from their smart
been working with Fidelity to improve the phone. In another example, it successfully ran a
information it provides around making an virtual reality pilot last year which encouraged
informed choice about how much you should people to use Fidelity’s Power of Small Amounts
be saving and how to manage your finances in tool and it will be rolling this out more widely
a joined-up way. this year
Fidelity has a new initiative, Workplace Fidelity is also looking at using QR codes
Workout, which sends communications in 2020, as these can offer an easy way to
relevant to your personal situation, based on direct members to further information or
specific life events or decisions you have made. educational materials. We will assess its success
However, we are disappointed about how in future reports.
slowly this initiative has been rolled out and we
have raised this with Fidelity. We will continue Accessibility
to monitor progress, as we believe it can really We raised the topic of information accessibility
help you understand your options when you in last year’s report. Documents are available
retire, as well as what you might need to do to in large print or braille versions on request,
make sure you have the kind of retirement you and all of Fidelity’s videos produced in 2019
want. We will also keep an eye on the take- include subtitles. It is also adding subtitles
up of the programme and how quickly email to their existing video catalogue. Member
addresses are collected for members. feedback told us that some of Fidelity’s letters
to members were not easy to understand, so
it has started a review of the communications
it sends out when a member makes a change
to their account or holdings, with the aim of
improving the quality. This project will take
some time and we will be keeping a close
watch on it, so we can ensure it makes progress
and delivers a better experience for members.
IGC Report 2020 17Administration quality, accuracy We have spoken at length with Fidelity about
Customer Experience
the work being undertaken and made clear
and timeliness that we do not want an indefinite deferral
We believe that you must receive timely of the external audit. While we understand
and accurate information in order to make Fidelity’s approach and position, we believe
informed decisions about your pension. this is an important facet of good governance,
As a result, we have been keeping a close so we will keep it on our agenda. We have
watch on service levels, particularly as there asked for, and Fidelity has committed to
were some issues last year, and we are providing us with, regular updates on the
continuing to press Fidelity to agree to an progress of the programme.
external audit of administration processes.
We have also reviewed complaints received Complaints update
throughout the year, so we can assess Fidelity’s Member issues or complaints must be dealt
performance fully. with quickly, proactively, professionally and
empathetically. When this happens, it can
Service levels improve people’s confidence in Fidelity and
As we reported last year, Fidelity had been their own pension plans.
facing some challenges over the volume of
work received, but it had generally improved Since the last report, Fidelity has moved
its service levels during the preceding year. its complaints on to an industry-leading
The exception was the provision of retirement complaints management system. This means
quotations, where a further increase in it can track and monitor any complaints
demand was still causing some difficulty. received and give feedback to the relevant
teams. In turn, this is expected to lead to a
This general improvement in service levels better member experience, as the feedback is
continued in 2019 and, in particular, the used to refine its processes.
delivery of retirement packs reached
the expected service level in May 2019 Thanks to this work, the continued good
and has broadly remained there since service levels and a rise in automation that
then. We will continue to monitor service reduces risk and increases accuracy, we
levels closely and we welcome the further are pleased to report that the number of
automation of processes to reduce risk and complaints has reduced from 0.7% in 2018
improve accuracy. to 0.5% of total membership in 2019. We will
continue to monitor the level of complaints and
External audit of administration processes how quickly they are resolved in our ongoing
We asked Fidelity to consider an external audit assessment of Fidelity.
of administration processes. While Fidelity is
continuing its programme of investment in
technology and automation, having reviewed
our written request, it has deferred a decision
until the end of 2020.
18 IGC Report 2020Net Promotor Score (NPS) employer feedback to comprehensive changes
Customer Experience
Fidelity uses NPS, a globally recognised in products, services and delivery (based on
independent feedback methodology, to the aggregate feedback from all responses).
measure loyalty and use customer feedback.
The score relates to a member’s or employer’s
With NPS, Fidelity can gauge how members
overall experience with Fidelity. They are asked
and employers rate their relationship – and the
how likely they are to recommend Fidelity as a
scores are regularly shared with us.
company on a 0 to 10 scale, where 0 is “not at
When getting employers’ views, a number of all likely” and 10 is “extremely likely”.
contacts for each employer receive personal
Responses are combined to calculate
invitation emails with a link to the short online
the Net Promoter Score, using the process
questionnaire. This makes it possible to gather
below. People are also asked for wider
a broad range of responses. For members’
feedback on the relationship, including their
views, people are invited to contribute two
satisfaction with the service and the telephone
weeks after they have contacted Fidelity’s
representative. NPS plays a key role in Fidelity’s
Service Centre.
future developments, such as improving
All feedback is carefully reviewed by Fidelity customer documentation, simplifying member
and, where appropriate, acted on. This can journeys and reducing the time it takes to
range from individual action plans based on process queries.
DETRACTORS PASSIVES PROMOTERS
0 1 2 3 4 5 6 7 8 9 10
Net Promoter Score % Promotors % Detractors
Member NPS (real-time reporting)
Year 2017 2018 2019
Quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
NPS +25 +27 +39 +41 +43 +46 +52 +50 +55 +57 +54 +54
Average NPS +33 +48 +55
Employer NPS (annual reporting)
Year 2017 2018 2019
NPS +53 +51 +64
We recognise that Fidelity focuses on providing a positive experience for both members and
employers, and we’re pleased that the scores have been rising each year.
IGC Report 2020 19Contact points for members and There is now a PlanViewer app for your Apple
Customer Experience
or Android smart phone. The log-in area gives
account accessibility you personalised information, while retirement
Online tools planning tools can help you see if your
PlanViewer is Fidelity’s online member portal. savings are on track for your retirement goals.
Members told us that they were finding it difficult An in-app browser then allows you to use the
to access PlanViewer, so Fidelity has upgraded full PlanViewer suite, so you can do things such
the login process to make it simpler and more as changing your investments. Fidelity will be
secure. PlanViewer now uses market-leading telling members about this app during 2020.
security, including two-factor authentication
and one-time passcodes (OTP) that can be sent Phone support
to email addresses or through text messages. We have received positive feedback on the
support provided by Fidelity’s pension service
There were some teething problems when centre which receives queries from members.
the new process was rolled out, but they were We believe that providing strong phone
resolved quickly and Fidelity continues to support remains important alongside other
develop the service. We believe this change engagement tools.
has helped members, as PlanViewer access
increased by over 20% in the last year. There Vulnerable customers
are now around 40,000 people logging on We believe the way Fidelity treats all its
each month. We are looking at other ways to customers is really important, but this is
encourage members to log into PlanViewer. particularly key for those who are vulnerable.
Fidelity has an established vulnerable
Another advantage to upgrading the customer policy, but it continues to enhance
PlanViewer login process is that the new its approach in line with developments in this
security authentication process requires a area. For example, it recently explored how
personal email address, which means Fidelity the policy is working in reality and is now
can do more to communicate digitally. planning ways to strengthen its approach.
This isn’t just good news from a sustainable, Developments will be shared with us in 2020,
environmental perspective. It means Fidelity which we will evaluate and then tell you about
is more able to stay in touch with you if you in our 2021 report.
move house, which is good from a retirement N
outcomes perspective. Your broader financial picture
In our 2019 Report, we looked at how Fidelity
Fidelity’s next generation of PlanViewer includes
has been developing its financial wellness
better navigation, making it easier for you to
capabilities through initiatives such as its
find what you need, with responsive pages
Personal Money Check Up and Retirement Savings
for mobile and tablet viewing, improved core rules of thumb and tools.
journeys and new online transfer capabilities.
Future phases will then add even more Fidelity is now working on the next generation
functionality. There is clearly more to do and we of financial wellness guidance, which will introduce
look forward to seeing these developments. the Fidelity Financial Wellness Score. This will cover all
four areas of financial wellness
PlanViewer also contains a number of tools – planning; budgeting, debt and spending; saving
to help with retirement planning. It will soon and investing; and protecting.
include a real-time retirement projection tool
that provides a potential retirement value The score will help you benchmark your
based on current contribution levels and financial wellness, so you can see if you need
investment choices. This will be updated daily to take action. It will also help you explore the effect
and automatically presented to you every that a change you make now could
time you log-on. The information is shown in have on your retirement savings. We recognise that
today’s terms, so you can see how it compares pension saving is part of your wider
with current income and possible needs in financial planning and hope you will find this
retirement – and easily spot any income gap or tool valuable, as it can help you understand topics
excess. We will monitor member feedback and across the financial spectrum.
usage of these tools to review the impact they
are having on the understanding of expected
retirement outcomes.
20 IGC Report 2020I mproving
Improving inputs for better retirement outcomes
inputs for
better
retirement
outcomes
The money you receive from your pension pot in retirement will reflect your contributions and
the decisions you make. We expect Fidelity to provide you with the tools you need to plan and
manage your retirement savings effectively. It must also have systems and processes that are not
just robust, but easy for you to use and follow.
What we look for:
Education Likelihood that members will get back on retirement at Met
least as much as they put in
Tax relief on contributions Partly met
Engaged Employer pays in as much as members do Met
employers
Easy to change the amount paid in Partly met
Systems Easy to transfer old pensions into the current pension pot Met
Flexible options for how to take pension income Partly met
Overall We are satisfied that Fidelity has adequate protections in place against
the risk of the value of your investments falling, and while there are never
any guarantees, FutureWise is structured to reduce risk as members
get older. Its performance is covered in more detail in the Investment
Strategy section, but it is performing in line with expectations.
That said, Fidelity has more to do around education, as we want it to
ensure members understand how tax relief contributes to their pension
pot. We would also like it to do more in updating the functionality and
ease of use of its systems, including progress in the ease of changing
contribution levels.
We believe Fidelity has partly met our expectations in this area.
IGC Report 2020 21Education Systems
Improving inputs for better retirement outcomes
In last year’s report, we explained that Ease of bringing in other pension pots
we were working with Fidelity to improve In the past, if you wanted to transfer an old
the educational information available to pension pot into your current employer’s
members. We expected there to be a mix of pension plan, you had to complete a suite
new media content to help you understand the of application forms and supply various
value of tax relief in pension contributions and other pieces of documentation. We received
the security of your pension during uncertain feedback that this process was frustrating
market conditions. for members.
Fidelity has advised us that these pieces will Fidelity has worked to improve and streamline
be available in the middle of this year, but we this process, as it observed that almost half
are disappointed progress has not been faster. of members began their transfer process
We will continue to discuss it with Fidelity and by visiting PlanViewer to download a form
ask that delivery is brought forward as much or calling the service centre to request this
as possible. form. It has now upgraded its systems to move
the transfer process online, which includes
Engaged employers automated communication with other pension
providers. This makes it much faster, with many
The level of contributions made to your
transfers finishing in around five days.
retirement savings is a key part of the
retirement income you could receive. We think it’s important that you, and all
members, can bring together pension pots
Employer contributions
with ease, as it can help everyone manage
The level of contributions both employers
and access their retirement savings. It’s very
and members make helps members to fund
helpful that this process has been reviewed,
their future retirement. Fidelity can provide
strengthened and made easier to follow.
employers with benchmarking which may
indicate whether their employees’ average Flexible options for how to take
contribution rates are below those of their pension income
peers. Fidelity then works with the employer The Financial Conduct Authority (FCA)
to assist with solutions such as targeted has been taking a close look at retirement
member communication. outcomes since 2015 and it has made new
rules requiring non-advised members to be
Ease of changing contribution rates
offered four ‘Investment Pathways’ when
Currently, Fidelity’s PlanViewer can allow
starting income drawdown. These pathways
you to adjust your contribution rates, if your
must be in place by August 2020.
employer’s internal systems don’t offer this.
However, many employers decide not to We want to ensure that members are
use this functionality, because they manage supported at this crucial time. As a result, we
their benefit structures via other platforms. will be working with Fidelity to offer simple,
We believe this functionality should be objective-based investment options when
available to all members via PlanViewer so entering drawdown or taking cash, so you can
we are asking Fidelity to talk to all employers make better investment choices. This will be
about this, as we believe that being unable integrated into Fidelity’s retirement journeys.
to increase contributions via PlanViewer, or
having to do so via another external tool, In addition, Fidelity is developing the capability
could be a barrier to members making positive to allow members to take a regular income
changes to their contributions. We will keep in retirement from an existing account
these developments under review and report through income drawdown (from September
back on progress in 2021. 2020) without having to transfer to a new
arrangement. We are monitoring progress
on investment pathways and the retirement
support provided around them. It will then form
part of our Value-for-Money assessment in 2021.
22 IGC Report 2020Security
Security
We review the controls and safeguards that Fidelity has in place to monitor the security of your
investments and manage any operational risk. As a reputable and financially strong pension
provider, Fidelity must also demonstrate how it keeps your personal information secure.
What we look for:
Asset security Controls and safeguards Met
Liquidity Met
Data security Data security Met
Reputation A reputable, financially strong pension provider Met
Overall conclusion We believe Fidelity has robust procedures in place to understand and
manage operational risks, and we are updated on the current strategic
direction every year by Fidelity.
We have also visited Fidelity’s cyber security team and been reassured
by the work they undertake.
We have no concerns around Fidelity’s strength, and are convinced
that its continued investment in the business means it will be a long-term
player in the pensions provider market.
We believe that Fidelity has met our expectations in this area.
IGC Report 2020 23Asset security We have observed that FIL Life appoints and
Security
monitors fund providers with care. For all fund
Many things in life involve risk of some kind and
providers, Fidelity assesses:
this includes saving for a pension. There is the
risk you may not save enough by retirement to • how they meet the regulations that exist to
take care of your needs, or that the funds you protect you
choose don’t perform as you hope they will. • their governance procedures
• the internal controls they have in place
There is also the risk of exceptional events, such
• their financial strength
as losing money because of the bankruptcy
• the performance of their funds in
or negligence of a fund provider. While the
comparison to benchmarks and similar funds
chances of this happening are very low, and
regulatory bodies have protections in place to This assessment happens before Fidelity
reduce the risk even further, you do still need decides to appoint a fund provider and then
to understand it and what Fidelity does to help continues on an ongoing basis. Fund providers
protect your savings against it. must sign agreements to stick to specific
investment criteria and supply Fidelity with
ongoing information and support. Fidelity
Fidelity and the fund providers available in
monitors their operational effectiveness and if it
your pension plan are regulated in the UK by
identifies areas for improvement, it has a clear
the Financial Conduct Authority (FCA) and the
process in place to raise it with them and work
Prudential Regulation Authority (PRA). These
towards making those improvements.
organisations set out the rules that Fidelity must
operate under and the ways it must manage If one of these fund providers or Fidelity lost
the investments of pension plans. To protect part or all of the money invested in one or more
our members’ money, there are strict rules of their funds because of an exceptional event,
that govern Fidelity’s financial soundness, and your pension account was invested in
and the systems and controls used to protect the affected Fidelity fund(s), the value of your
your investments. investment in that fund would fall. The value of
your pension account would be adjusted to
These regulatory bodies have many powers,
take account of any losses. If the exceptional
including the ability to inspect Fidelity’s
event was severe enough, you could lose
operations and risk controls. Fidelity also
some or all of the money you had invested in
has to report regularly to the PRA on their
that fund.
financial strength.
Once again, while the chances of this
There are different types of underlying
happening are very low, and regulatory bodies
investment funds, so they operate, and are
have protections in place to reduce the risk
regulated, in different ways. For example, if the
even further, Fidelity would pursue the fund
manager of some funds became insolvent, the
provider or appointed receiver (the person
assets would be protected, because regulations
responsible when a company becomes
require them to be held by an independent
insolvent) for the full amount owed. However,
custodian separate from the fund provider.
Fidelity cannot guarantee the amount you
received back.
The UK Financial Services Compensation
Scheme (FSCS) is an independent body
set up by the Government and funded
by the financial services industry. It pays
compensation when it’s satisfied that an
insolvent fund provider can’t pay the claims
against it. In certain circumstances, you may
be entitled to compensation from the FSCS.
24 IGC Report 2020You can also read
