Aviva Pension Index Fund Changes - ESG Applied

BankerInTheBlack

jimjames said:

Received  a letter from Aviva about changes to the index funds in my pension this week. It appears all the index funds in my pension are being changed to exclude companies on an ESG basis so these will no longer be index tracker funds and it's also going to cost me for the changes. There doesn't now appear to be any way in an Aviva pension to have standard index trackers. The letter implies that it's fait accompli and no way to opt out of it.

Has anyone else had this and found a way to keep standard index tracking funds?

Hey @jimjames

Wondering if you got anywhere with this. I'm reluctant to pay any fee for something that I haven't chosen. So I'm looking to transfer to a different fund, but struggling to find anything comparable on the available options. 

Albermarle

On a slightly different but related note, the FCA has been warning fund managers not to label their funds 'green' unless they really are, as more greenwashing is suspected.
I see that Standard Life are renaming many of their funds ( although not actually changing them) by essentially removing the word 'sustainable' from the fund names. Presumably this is easier than complying with whatever criteria the FCA are proposing for green/ESG funds.

jimjames

AlistairMSEnew said:

jimjames said:

Received  a letter from Aviva about changes to the index funds in my pension this week. It appears all the index funds in my pension are being changed to exclude companies on an ESG basis so these will no longer be index tracker funds and it's also going to cost me for the changes. There doesn't now appear to be any way in an Aviva pension to have standard index trackers. The letter implies that it's fait accompli and no way to opt out of it.

Has anyone else had this and found a way to keep standard index tracking funds?

Hey @jimjames

Wondering if you got anywhere with this. I'm reluctant to pay any fee for something that I haven't chosen. So I'm looking to transfer to a different fund, but struggling to find anything comparable on the available options. 

I've put a formal complaint into Aviva and trying to get some publicity with some of the media but no joy so far.

jimjames

Had another thought on this, assuming Aviva don't change their position. I need to investigate if I can transfer all current contributions elsewhere where I can invest as required but still allow new contributions to be made. Not sure if Aviva allow that so will need to check.

Imnoexpert_2

11 October and I have only just been advised of the change to my pension funds and been told of the 'cost' and that the change will happen 'by the end of November'. So I don't know exactly when and have limited time to take the suggested financial advice.

In effect then my index tracker is not a whole of market tracker but an actively managed fund.

I've complained to Aviva - who won't care.

I dont even know what the potential effect of this will be on the value of my funds (apart from the charge) and Aviva haven't told me.

Anyone care to speculate?

jimjames

Imnoexpert_2 said:

I've complained to Aviva - who won't care.

I dont even know what the potential effect of this will be on the value of my funds (apart from the charge) and Aviva haven't told me. Anyone care to speculate?

I still have an active complaint with Aviva waiting a response. The more people that complain the better as they might reconsider.
In terms of the effect, no one knows. As you say you're no longer holding an index tracker, it's now tracking something else that may do better or worse. Having said that some of the best performers over the last few years have been companies that would have been excluded like tobacco. 
If my complaint is refused I'm planning to move my funds to Vanguard. I'll leave a small amount with Aviva as my company pay in but I can move the existing lump sum away and do the same every couple of years.

jim1999

I've since received comms as well.  I think the challenge is going to be that a) a company pension doesn't have to offer passive index trackers, "lifestyle funds" and the like are perfectly acceptable, b) the implication is that Blackrock are at least partially responsible and c) I'm free at any point, with no charges, to move my money into a different fund.

I don't think it's a solution that works for me, because I prefer to invest in passive global trackers, which they don't seem to have any examples of, but I'm not sure they're technically doing anything wrong.  As for whether the employers will take any interest... probably only if employees start complaining to HR and / or the team managing the pensions.

londonadviser

Hi - I found this thread on a Google search when I was looking for something for a client. For full disclosure, I'm an Independent (yes, there are still some of us around) Financial Planner and I invest my own small pension in a "proper" ethical / ESG fund, ironically in the Liontrust range that Aviva created and sold before jumping back onto the current ESG bandwagon. 

I am very anti Aviva's approach here. I believe that investors who wish to track indices should be able to track indices without any external interference and Aviva's pension policyholders may be unable to do this once the funds are changed.

There's a couple of threads on this, and I thought I'd try to put in some points about what I know so far. I'm waiting for a bit more clarity from Aviva. 

As far as I know, this change will apply to Aviva's PENSION funds, on both company and individual pensions. This is an important distinction from their platform. Aviva's Pension funds are custom versions of funds selected by the pension trustees from the whole market and made available in their pension plans. They will usually have Aviva Pension or Aviva Pn in the fund name e.g. Aviva Pension BlackRock (50:50) Global Equity Index Pension Fund. Aviva's pension plans have between 20 and 300 funds available, depending on the product, history, etc.

If you buy BlackRock funds directly on the Aviva platform, these should not be affected, as I don't think BlackRock are changing the underlying indices on their own funds. If there are, you should be able to choose from Vanguard, HSBC, etc. as an alternative.

The change is being made due to Aviva's Baseline Exclusions Policy. As I understand it, Aviva has made the decision not to manage ANY funds that invest in weapons, some fossil fuels, or tobacco. This will apply to all of Aviva's funds, including those that they buy in from other managers (including BlackRock). 

Employers ARE twitchy about ESG matters. I am asked regularly for details of if/how my corporate clients' fund choices are sustainable. Employers want to be seen to be sustainable and this is spreading to their company pension schemes. This is somewhat misleading as many Workplace pensions (especially Aviva) are PERSONAL pensions (e.g. group personal pension plan) and not occupational or trust-based schemes. Therefore the employer shouldn't have too much say in how their employees invest, but they don't always grasp this. Many employers are chasing B-Corp status, or find that investors won't invest in them if they are not sustainable businesses themselves, so they are desperate to tick as many sustainable boxes themselves. This is why Rolls Royce and BAT have great ESG scores as businesses, but fail as soon as anyone looks at what they do.

Aviva are also the subject of takeover rumours so would want to be seen as sustainable.

Don't worry too much about the 0.04% charge. Most of Aviva's Workplace pensions are priced at scheme level, so the core funds (Aviva funds and trackers) shouldn't be affected significantly by additional costs. If you're paying more than 0.40% p.a. overall though, it's worth reviewing in any case.

Do be aware of investment performance though. I'm struggling to find a good like-for-like comparison, but Vanguard's FTSE Developed World Index fund fell by 7.7% in 2002, when markets were propped up by oil, gas and tobacco. Vanguard's ESG Developed World All Cap Equity Index Fund fell by 13.1% in the same period. And this is why I don't think that employers and insurers should make ESG decisions on behalf of their employees and customers. Not everyone can afford to take this additional risk.

Hope this is of some use. MSE won't let me paste links as I'm a newbie, so I can't cite my sources. Sorry.

rockers

Thank you for making efforts in this regard. I have also asked for  a formal complaint form from Aviva - but they seem reluctant to send me one.

londonadviser

Try emailing your complaint to smcteam@aviva.com and pencomp@aviva.com and make it clear that it is a complaint. Aviva are pretty good at responding in general. I don't think they will budge on this issue as it's what Aviva wants, and it's what employers want, and they can use their position as Pension Trustees to say that "most" of their policyholders want to invest sustainably. Most policyholders don't pay enough attention to their pensions for there to be anywhere near a majority who are unhappy about it. But every expression of dissatisfaction will count.