IGCs have a number of statutory duties, including producing and making publicly available an annual report with information on value for money and how the IGC has complied with its duty to act in the best interests of members. IGCs have different powers and duties to those of trustees of occupational pension schemes. Broadly speaking, the role of the IGC when assessing value for money to date has been to make recommendations to and influence its product provider in relation to value for money in accumulation. This is different to that of a trustee of an occupational trust-based DC scheme who has the power to change investment strategy/funds etc. The above duties, particularly around communications, give IGCs a quasi-executive role and raise questions about who is responsible if in the future it is found, for example, that the pathways are not appropriately designed or communications are inadequate.
The FCA has, however, significantly extended the remit of IGCs to encompass personal pension arrangements and workplace arrangements offering drawdown, and to assess and report on ongoing value for money for workplace personal pensions in accumulation.
From 6 April 2020, firms who provide non-advised drawdown to customers with a contract-based personal pension arrangement (eg SIPP or other form of personal pension policy) will be required to have an IGC or GAA (governance advisory arrangement).
From 1 February 2021 (recently extended from 1 August 2020), product providers will be required to put in place investment pathways for customers in non-advised drawdown. Alongside this the IGC/GAA will need to assess the proposed design of pathway solutions and product providers will need to take into account their concerns.
IGCs are also required from 6 April 2020 to consider whether all communications to customers within its remit are fit for purpose and properly take into account their characteristics.
Finally, IGCs are required from 6 April 2020 to consider and report on:
We help IGCs and their product providers to assess value for money and are helping IGCs to understand the new requirements around pathways, ESG and communications. We are working with IGCs and their product providers to put in place verification processes to ensure FCA principles and COBS rules requirements are met. We also advise on the governance of IGCs more generally and the documentation of their decision making processes, as well as preparing them for discussions with the FCA.
We chair two industry-wide groups for IGCs. The first is for IGCs and their providers who are collaborating on various research programmes around “value for money” and benchmarking. The second is for IGCs only as they consider how to approach their role and the extension to their remit.