Lloyds Banking Group is proposing to move 108,393 members of Your Tomorrow pension scheme to the Scottish Widows Master Trust effective from the early part of next year. The transfer of £4.8 billion of member assets in the Your Tomorrow pension scheme will take place between Q3 to 2026 and Q4 2027.
In seeking to justify the proposal, Ms. Sharon Doherty, Chief People and Places Officer, said: “This is about giving our people the same digital first experiences that we provide for millions of our customers, helping to empower them with their finances.”. Is that really the case or is it more Lloyds saying: “how can we convince customers to invest their pensions with us, when our own staff invest their pension savings with other providers”. Let’s be honest, that’s the main driving force for the transfer.
Investment Performance Is Key
The value of defined contribution pension schemes, like ‘Your Tomorrow’, depends on the level of funding put in by the member of staff and employer, the level of management fees and, most importantly of all, the investment returns of the fund.
One of the reasons why the Lloyds Trustee moved the pension scheme away from the Scottish Widows Investment Partnership (SWIP) was because of its woeful investment performance. It’s various funds under underperformed against their benchmarks year after year.
Independent investment advisers, Bestinvest, run a regular guide to avoid the worst performing investment funds over three years, which they call ‘Spot the Dog’. Before the Lloyds Trustee moved from SWIP some of its funds appeared in the kennel. In fact, some of the SWIP funds were regularly classed as ‘dogs with fleas’.
The Trustee seemed more concerned about how it would look if it moved the Lloyds pension scheme away from Scottish Widows because of underperformance rather than maximising financial returns for members. After a long campaign, the Trustee eventually moved the whole scheme away. It caused a political storm at the time.
In the interests of consistency, we’ve reviewed the latest edition of Spot the Dog [January 2025] which covers the 137 funds that have met its strict criteria for earning a place in the kennel. There are no Scottish Widows funds currently in the kennel. The biggest dog in the kennel is the £9.4 billion St James’s Place Global Quality fund. It’s riddled with fleas!
Our concern is how the new Scottish Widows funds are going to perform?
We will be reviewing the new funds to make sure they are fit for purpose. Equally, we will monitor performance and should any SW funds appear in the kennel, then we will expect the Trustee to act decisively. Underperformance will not be tolerated by us.
Democratic Deficit
Whilst we disagree with the current appointment process for trustees, at least the Your Tomorrow pension scheme does have trustees who are either past or present employees of one of the companies in the scheme. (Lloyds, Halifax, Cheltenham & Gloucester etc) That direct relationship will be lost when the scheme moves to the Scottish Widows Master Trust.
The Scottish Widows Master Trust is being run by 4 professional trustees. None of them have been appointed by members. We understand that they have all been appointed by Scottish Widows.
And then there is the role of the ‘Scheme Strategist’. This “is responsible for driving the commercial activities and business plan for the Scottish Widows Master Trust.”. That role “is undertaken by the Master Trust Strategist Committee who are a highly experienced, and workplace pension focused, committee drawing on a breadth of expertise from across Scottish Widows. The Strategist Committee have regular and open dialogue with the Trustees”.
This secret committee raises several key questions about the management of the Master Trust including:
- Who controls the Master Trust?
- What is the relationship between the Scheme Strategist Committee and the Master Trust?
- Who makes the decisions about investment performance? The Master Trust or Strategist Committee?
- Why does the Master Trust not have Member Nominated Trustees?
- Is it planning on having Member Nominated Trustees? If so, when and how will they be appointed.
- Why does it have only 4 trustees?
The Next Steps?
Before it can make changes, the law says that Lloyds must go through a 60-day consultation period. That consultation periods ends on 22nd August 2025. We will be writing to members providing them with a letter asking for clarification on certain governance issues.
In the meantime, members with any questions should contact the Union’s Advice Team on 01234 262868 (Option 1).
MEMBERS SHOULD PASS THIS NEWSLETTER ON TO THEIR COLLEAGUES IN HALIFAX & LLOYDS SO THEY TOO CAN BENEFIT FROM THE ONLY INDEPENDENT TRADE UNION IN LLOYDS BANKING GROUP.