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Accumulation and savings — How to provide value for money for both customers and shareholders

(Re)thinking Insurance Podcast: Season 3 – Episode 10

July 19, 2023

In this episode, we discuss the UK Accumulation and Savings business and why Value for Money for Defined Contribution schemes can be beneficial for both customers and shareholders.
Insurance Consulting and Technology

Following the introduction of automatic enrollment into workplace pensions in 2012, there has been increasing focus within the UK on delivering value for savers. And with the government’s recent proposals for a common framework for assessing Value for Money (VFM) for Defined Contribution (DC) schemes, developing product and services which help customers to and through retirement has never been more important.

In this episode of (Re)thinking Insurance, Hjoerdis Gerke is joined by Phil Tervit and Kris Black to discuss the UK Accumulations and Savings business and why Value for Money in the context of workplace pensions can be beneficial for both customers and shareholders, not only for the UK but also across borders.

The more VFM you can offer to your clients, then the more business you should win and the more business you should retain.”

Kris Black | Accumulation and Savings Director, Insurance Consulting and Technology

Episode 10: Accumulation and savings — How to provide value for money for both customers and shareholders

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About our host

Hjördis Gerke

Sales Consultant, Insurance Consulting and Technology

Hjördis is a Sales Consultant based in Cologne for WTW’s Insurance Consulting and Technology business. Hjördis has more than 12 years of experience as a professional services marketing and sales manager and her areas of expertise includes sales marketing, digital transformation and insurtech.


(Re)thinking Insurance - Episode 10: Accumulation and savings — How to provide value for money for both customers and shareholders

PHILIP TERVIT: The providers we speak to are seeking to provide value for money to their customers. And I think the key here is to use the positive intent of this regulation to further enhance their business plans. And those that prove to provide better value for money, I expect will win more schemes and customers and retain them for longer.

SPEAKER: You're listening to Rethinking Insurance, a podcast series from WTW where we discuss the issues facing P&C, life, and composite insurers around the globe, as well as exploring the latest tools, techniques, and innovations that will help you rethink insurance.

HJOERDIS GERKE: Welcome to a new episode of Rethinking Insurance. I'm your host Hjoerdis Gerke, and today we're going to look at the UK accumulations and savings business and why the value for money concept in the context of workplace pensions can be hugely valuable. Not only for the UK but also across borders. But before we dive deep into today's topic, I'm delighted to introduce you to our guests Philip Tervit and Kris Black. Welcome to both of you.

PHILIP TERVIT: Thank you, Hjoerdis. It's nice to be on the show.

HJOERDIS GERKE: So Phil, as a senior director at WTW, you have over 20 years of experience in the insurance industry. You are leading the accumulations and savings business on behalf of insurance consulting and technology. And in that role, you are taking our software and consulting offering to the workplace, investment platform, and asset manager clients in the market. But we also want to some fun facts about you.

So as you may know, as part of the prep work, we always Google our podcast guests and to see what turns up. And interestingly, I have found a fundraising website you set up in 2011 when you ran the Edinburgh Half Marathon with your sister for charity purposes. At least I hope that was you.

PHILIP TERVIT: That was me.

HJOERDIS GERKE: That was you. And you already declared it a one off birthday gift to your sister back then and admitted that you didn't necessarily finish in record time. So how did your running career go on? Where are you today? And is running something you still enjoy or never did actually?

PHILIP TERVIT: That's funny that you found that on the internet. Yes, I did do that. And that was quite a painful experience having done very little training back in 2011. I do still run I very much enjoy it. And I have done a few marathons since and one coming in a couple of months time, so back in training mode.

HJOERDIS GERKE: Sounds great. And another very warm welcome to Kris. Welcome to our podcast and welcome to WTW. You just started working with us end of last year as an accumulation and savings director also in the UK. And, of course, I was quite curious to also google your name. But as expected, you're not the only Kris Black in the world. So unless you have a second life as an author, cartoonist, or fashion designer, what were you doing before joining us? And what do you want to achieve in your career at WTW?

KRIS BLACK: Sure. Yeah, I definitely wasn't a shoe designer. I think I've googled myself in the past as well. I think that was one of the ones that comes up are different Kris Black. So, yeah, I joined in December. I had previously been working for Aviva for nearly 20 years. I've come to WTW to help build out the accumulation and segment within the UK. And I suppose what would I like to achieve at WTW is that really.

I think accumulation and savings for us at the moment is a new growth area. So I'd like to build our presence in the market and make sure that the accumulation and savings segment punches its way it compared to some of our other segments. And, I guess, ultimately I'd like to be able to help our clients to succeed in their business goals and help our clients to ultimately help their end members, their savers, and get the most out of their products and certainly in securing the best possible retirements they can ultimately.

HJOERDIS GERKE: Good to have you on board.

KRIS BLACK: Thank you very much. Good to be here.

HJOERDIS GERKE: So maybe let's start with some definitions. Value for money, what is it all about? And why is especially the UK currently focusing on VFM or Value For Money?

PHILIP TERVIT: So value for money, it's really a framework to assess the quality of a workplace pension solution for its customers and members. We're really in the world of defined contribution pensions here. And holistically, what value for money is covering is really a range of value. It's not just about charge levels but the full package of what the customer receives.

HJOERDIS GERKE: And why is the UK focusing on VFM right now?

PHILIP TREVETT: I guess this is really part of a journey that was first brought in with auto enrollment some 10 years ago where essentially individuals are being asked to save for their own retirement. And that shifts a lot of responsibility to the individual to think about their own financial well being and retirement.

And one of the challenges here being faced by individuals and the industry is whether they have all the information with which to make those choices. What investments will they make? What products do they need? How much do they need, et cetera? Have they got the information with which to make those decisions? And advice, there's an advice gap in the market, which we'll come on to talk about. And, I guess, this is just fundamentally a key pillar of retirement planning both individually and as a society.

HJOERDIS GERKE: So at first glance, it seems that the VFM concept is very UK specific. But as mentioned at the beginning, the topic might be also relevant for other markets or international listeners. Could you explain to us why that is?

KRIS BLACK: The principles of value for money absolutely go beyond the borders of the UK. Where there's defined contribution savings as there are a number of markets across Europe and beyond, the concepts that we'll talk about on this podcast are very much relevant to other regions of the world as well.

HJOERDIS GERKE: So why is value for money particularly pertinent right now?

KRIS BLACK: So I guess one for me, I guess, the UK regulator, they've done quite a lot in this space in the past. But I think the key thing that's changed is, as Phil mentioned, auto enrollment for pensions have kicked off in the UK around about 10 years ago. And obviously with any new proposition or new development, it started slow, and then built up gradually over time.

So I think now what we're starting to see is that those members who have been paying the contributions for the last 10 years or maybe something 5 years, depending on what sort of employers have been in, they're starting to really amass some quite sizable DC pots. So the regulator needs to treat these a little bit more seriously in some regards.

So when you're looking at smaller pots, possibly value for money wasn't a top of anyone's agenda. But as the pots grow, making sure that people really do get the best value for those larger pots is absolutely paramount. So I think now it's really a part of them almost growing up I'd say for DC pensions in the UK really.

HJOERDIS GERKE: And how's the UK regulator looking at VFM?

KRIS BLACK: Looking at it through a number of different lenses, which I'm sure we'll come onto as Phil mentioned, I mean, charges and costs have been probably a key focus for the UK. And I suspect that's in some regards been because it's an easy metric to look at. So I think when you think of value for money, the value bit can be quite subjective. So it's a little bit more difficult to really pin down.

But when you look at the costs and the charges, that's a numerical number. It's either a percentage of an asset, or it's a pounds amount, and it's a little bit easier to benchmark people against. So I think the regulator in the past had focused quite a lot on charges, and I think they're moving more towards value and actually what people get from it. So hopefully that would be really good news for everyone because I think just a one dimensional view of charges really doesn't tell the whole picture with DC pensions.

PHILIP TERVIT: And just to add in to that, Kris, as you allude to, there's things like service metrics. What's the quality of the servicing? What's the overall consumer duty perspective, the end outcome for the customer as well as the quality of the investment offering or indeed the governance arrangements around the workplace pension being provided? So that starts to get a more holistic view of value.

KRIS BLACK: Yeah, absolutely. There's a range of different metrics. And I think there's some consultations in the UK at the moment which are proposing some of those things. And obviously people have created their own sort of value for money benchmarks. WTW have been probably market leaders in this space, I think, for the last few years. So it be certainly an interesting place to see how the market develops over the next few years really.

HJOERDIS GERKE: Coming back to consumer duties regulations, how are they different to assessing VFM?

PHILIP TERVIT: No podcast would be complete at the moment without mention of consumer duty. This is a UK regulation but similar to VFM, there are elements here that go beyond the borders of the UK. It's setting a principle that the regulator is keen that customers or members get good outcomes from their policies. It's applicable wider than workplace pensions that applies to all insurance products, in fact, wider to financial services, too.

With VFM and consumer duties, some of our clients are struggling with two overlapping regulatory regimes currently. And so that's a key concern currently and a key challenge. But one particular area is where consumer duty is particularly applicable is on heritage or legacy type contracts which might be policies that were sold in the past to save for retirement but are perhaps more complicated than the current versions.

HJOERDIS GERKE: So would do you say customers and legacy contracts would be better off in a new contract or fund?

PHILIP TERVIT: So we know some clients are looking to help their customers move to more modern products. And that might mean upgrading or moving existing policies into a more modern equivalent. But caution is needed here as some legacy contracts may have particular options, or guarantees, or bonuses. So caution is needed when doing such a program.

HJOERDIS GERKE: Can it provide or legally do anything about that?

PHILIP TERVIT: Yes, there are options available to do so, but it's not an easy path. But it can have real benefits for its customers if it's delivered successfully.

HJOERDIS GERKE: OK. So would you say that the focus on VFM is all being driven by regulation?

KRIS BLACK: I wouldn't say it's all being driven by regulation. So there are a number of different regulators. Phil mentioned that the work in the UK and they're getting together to produce a bit more of a holistic view of VFM. But, I mean, the concept of VFM obviously has been around for a number of years. And all of WTW clients, the DC providers in the markets have been looking at this for a number of years.

I mean, ultimately, value for money is a measure of what a provider's clients get from that provider. So when you're looking at a competitive market, the more VFM you can offer to your clients, then the more business you should win, the more business you should retain. Your clients should be happier in that virtuous circle that you see of. Happy customers, happy shareholders should hopefully ring true here.

And I think from a WTW point of view, one of the things that we've always done is start looking at providers from that benchmarking point of view. So one of the things we find with DC pensions is that a lot of people don't necessarily understand exactly what they have at the end of their journey. So that's true for employees, but it's also true for sometimes for employers or trustees of these pensions as well.

So actually they need specialist advice to help them to navigate some of this complexity. And I think that's an area where WTW in the past have always worked quite closely with those employer customers really. And I think it's probably another area which we'll continue to focus on in future.

HJOERDIS GERKE: So delving into VFM further, can you expand on the factors used to determine VFM?

KRIS BLACK: There are a lot. And the ones that, I think, we'll look at and the ones that the regulator are focusing on are certainly a subset, but it's not to say they are the be-all and end-all. But the key ones that the regulator are looking on are probably investment returns, so looking at the actual returns that members get from the funds that they are invested in.

They're looking at that on a number of different bases that they want to look at-- so net of charges and gross of charges and possibly net of just investment charges. But the look of that historically, probably of a number of different years. But they're also going to start looking at risk adjusted returns or the volatility of those returns. So I think we'll start to see a relatively complicated picture emerging in just in terms of the investment returns that members of different funds are getting really. So that's certainly one pillar and probably the most important one in terms of actually determining what somebody actually retires on or how large their DC pot is at a particular point in time.

The other one we already mentioned is charges. So what do people pay for the pensions that they're invested in? And this is an area where I don't know how it compares internationally, but certainly the UK is relatively opaque in some regards. And that's not a bad thing, per se.

But what you do find is that individual employer pension arrangements tend to be bespoke priced so everyone has their own individual price. That's not people are hiding things behind closed doors. That's just the way the market works. And these things aren't necessarily published. So the regulators themselves are trying to say, look, they would like a little bit more transparency in some of those charges of what people are paying. But it is a key focus and it has been for a number of years, really. I mean, Phil has a couple of those. Do you want to touch on those ones?

PHILIP TERVIT: Yeah, there's a couple of other points here. So I'll just touch on servicing for a moment. So customers, whether they need to switch funds or have a life event, inevitably they need to engage their provider at that point of need. And what is part of a value concept is to how well you service those customers. How quickly and how robustly do you help them with the issue at hand? And so this is something that providers have been challenging themselves with for some time. They'll have some service level standards they seek to provide.

But how good is that and how comparable is it to their peers? And also is it actually meeting their increasing customer expectations to do things more digitally and quicker than ever before? So that's something we talk a lot about end-to-end processing on our DC research team are absolutely market leading on having a good awareness of how strong the market is and comparing and benchmarking firms against one another, which takes you on to a wider piece of customer journeys and what the overall product offering is and how you help individuals through the different stages of their pension saving and into retirement.

This is a really topical area as, I guess, DC pensions become the first and foremost port of call for retirement income as it replaces defined benefits. So how do you go to and through retirement? And what are the product offerings and customer journeys to facilitate that?

HJOERDIS GERKE: So that's a lot of new input information. Who will be the audience for this? What do you think?

PHILIP TERVIT: The key audience for all this value for money information is really, first and foremost, going to be the large employers, the trustees of the master trust schemes or own trust schemes. The independent governance committees have a key role as well as the providers. I think the end customer and also the employers will be interested in this, too. Albeit, there is a difference between the large employers-- but this is going to be key-- and smaller employers who really just want a more simple straightforward solution, which are available in the market.

But value for money at its heart, if we get it right, will really support all customers that are in [INAUDIBLE] DC pension arrangement which is mandated in the regulation, and therefore, it should help most people in society.

HJOERDIS GERKE: So what is the increased regulation aiming to achieve?

KRIS BLACK: So ultimately, this is really looking to improve value for money for end customers and is part of improving value for money looking to improve trust in the industry from the end members as well. So a lot of these products aren't necessarily that well understood by customers, but this will hopefully aim to improve customer understanding. And if not improved customer understanding, it gives information to trusted advisors so that you can maybe more positively delegate some of those decisions to other people.

But one of the things I think the regulation is not necessarily clear on is like whilst they would like to improve VFM, exactly how that will happen is yet to be determined. But I think with this information, that should be published, and you should see benchmarking standards start to occur, then schemes will be able to compare themselves a little bit more easily from provider to provider. And hopefully that really drives an increasing hurdle rate that people have to overcome to really succeed in this market.

And I think that will be a double edged sword. I think for providers who can keep up with that increase in the benchmarks and the hurdle rates, then they should really win out of this one. But it really does create a risk that if you can't keep up, then from a provider's point of view, you risk being left behind or even the worst case scenario forced to exit this market-- but, yeah, ultimately, regulation looking to improve value for money for the end customers.

HJOERDIS GERKE: And do you think that this is the end game for VFM in the UK?

KRIS BLACK: No, certainly not. I mean, I think the consultations are out at the moment would recognize that. And I think it's quite a positive really. As any kind of new area which is a little bit difficult to grasp, I think starting small and building out probably is the right approach to take.

Some of these changes that regulators will impose on providers, they're not cheap for people to comply with and to implement. So the idea of starting small and building out, I think, is absolutely the right one to look at. So the metrics that have been talked about at the moment. I said investment returns, charges, servicing, customer journeys.

They'll start there. They will expand. People will look at refining those ones. New metrics will come in. I think the service in particular is really an area where people aren't quite sure exactly how to benchmark and what service really-- what good service really looks like. So I think that is an area which will definitely develop over time.

I think the other thing is we mentioned at the start this is very much a workplace defined contribution pensions focus at the moment. However, there's already talk about this being expanded into more individual pensions. And I think once it because there, then there'll be other savings type contracts which are naturally quite similar. So you would see it expanding into there as well. So, yeah, I think the metrics being looked at and I think the products being covered will expand over time.

HJOERDIS GERKE: So before we come to an end, do you have any advice for providers of workplace pensions? What opportunities can they take from the current focus on VFM?

PHILIP TERVIT: The providers we speak to are seeking to provide value for money to their customers. And I think the key here is to use the positive intent of this regulation to further enhance their business plans. And those that prove to provide better value for money, I expect, will win more schemes and customers and retain them for longer.

HJOERDIS GERKE: So what would be the key takeaways for our international listeners?

PHILIP TERVIT: I think some of the challenges here are faced in other countries, too, where there's a move to pass the onus of retirement savings and financial well being on the individual. We've seen that in a number of countries at different stages in that journey. And in each case, there's the challenge of, have the individuals got sufficient information. And are they saving enough? And are they making the right decisions with that information in mind?

So the concepts of value for money are obvious in many ways is the individual getting the product that they need and being serviced accordingly and have the options available to them at the time that they need to make those decisions or take up those different investment options, for example. So in some ways, the concepts we've discussed today apply, whether it's mandated by regulation or not.

And, I guess, the other thing we've seen in the past is UK regulation can be seen or considered elsewhere by international regulators, for example. And the information will become open for others to see and maybe adopted elsewhere in the future.

KRIS BLACK: Having a look at some of that open information could be interesting for some of those international audiences as well. So if you look at some of the things that the UK is publishing, and if you benchmarked yourself against some of those UK standards, there may be things that you think look the UK is doing better than we can. And that gives you an opportunity to find out how and why. If there are things that you're doing better than the UK, then maybe there's potential markets that people could open up into the UK as well.

So I think this open sharing of information, I think, we've seen numerous times across different industries that once the information exists, then new and unexpected and hopefully positive things will come out of it.

HJOERDIS GERKE: So ultimately, how can we as WTW help our clients in assessing VFM? What do you think from your experience?

PHILIP TERVIT: This segment of the market is really fast moving, and the value for money regulations have added an additional fourth complexity, also a regulatory timeline an emphasis on this area. So I think first and foremost, the discussions we are having are helping clients navigate the regulatory complexity-- and that is with the providers as well as the trustee boards and the independent governance committees who they themselves have to meet regulations in this space.

We already offer a range of value for money services, whether that's analyzing the quality of the investment default fund or benchmarking your servicing to your customers. These are things that are almost like a menu of support that we can provide in respect of value for money and help clients ultimately improve their propositions through innovation and insight. So what are the products that allow your customers to move to and through retirement is a very topical area and one that we are using innovation to think through solutions.

But ultimately, our goal at WTW is to help providers or the IGCs and Master Trusts to create a business that offers fantastic value for money for both their customers and ultimately their shareholders, too, not an easy balancing act.

HJOERDIS GERKE: I think that was really interesting. Actually, I learned a lot today. Thank you both for joining me today. And, yeah, it was a pleasure. Thank you.

KRIS BLACK: Thanks, Hjoerdis.

PHILIP TERVIT: Thank you very much.

HJOERDIS GERKE: And thank you listeners for joining us for this episode. And if you found this interesting, then make sure to join us on future episodes of Rethinking Insurance.

SPEAKER: Thank you for joining us for this WTW podcast featuring the latest perspectives on the intersection of people, capital, and risk. For more information, visit the Insights section of

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