Auto-enrolment is creating millions of new pension pots, so without some way to help people keep track of their multiple pension plans, we’d end up with billions of pounds getting lost in the system. After Open Banking, Pension Dashboards will be another building block in delivering to people control over their savings and investments, on their desktop or in the palm of their hand. Contributor Tom McPhail, Head of Policy – Hargreaves Lansdown.
There are still some significant issues though. Auto-enrolment shouldn’t force people to open a new pension every time they change jobs; they should be able to take their existing pension with them and simply ask their new employer to pay into that existing pension. This would improve engagement, save costs and simplify the system. We wouldn’t dream of forcing people to change their bank to one chosen by their employer every time they change jobs, yet that’s what we do with their pensions.”
The Government still has to bring forward a Pensions Bill in order to make Pension Dashboards a reality. In the present political climate that means we shouldn’t take anything for granted until the scheme is actually up and running.”
What we’re expecting
Development work to be overseen by the Money and Pensions Service (MAPS, currently and for another few days known as the Single Financial Guidance Body)
- Confirmation that multiple commercial pension dashboards can be developed alongside a public version, hosted by MAPS
- A single utility pension finder system sitting behind the multiple dashboards
- Dashboards to be free for consumers at the point of use
- Emphasis on security over functionality: the DWP is more concerned to ensure the system is secure than that it is flexible and adaptable
- Data outputs to be shareable, to allow financial advisers and platforms to make use of the data (subject to customer consent)
- Confirmation of legislation to make the provision of pension dashboard information compulsory (with possible exceptions for very small pension schemes)
- Inclusion of state pension information
- Inclusion of final salary pension benefits
- Phased implementation over a number of years, so initially data on the dashboards will be incomplete
Key Challenges
Politics. In principle, Labour supports the pension dashboard, so it could survive a change of government. However it was touch and go whether the project survived Esther McVey’s tenure at the DWP and any change in personnel could disrupt plans. How much longer do we have Guy Opperman for? Who knows. He has been a big fan of the dashboards project.
Technology
It’s moving fast and one of the DWP’s challenges already has been to decide what model will be sustainable. Blockchain, APIs, Open Wealth, Digital IDs are all potentially part of the solution but could also make elements redundant. This is perhaps one reason why it has taken so long to get this far. Whatever they specify, it has to still be relevant years from now, which means it has to be able to adapt to technology advances.
Coverage
The dashboards need to have universal coverage if they’re not to risk returning false negatives. Someone using a dashboard needs to know they’re seeing all their pensions. This means every pension scheme in the land, of which there are tens of thousands, has to build the necessary data feeds and link it into their own back office records. This. Is. Not. Simple.
Advice
What is someone going to do with the information once they’ve got it? MAPS will help but pension providers, delivering financial guidance will have to take up a lot of the slack. Later this year the FCA will be reviewing the impact of the Financial Advice Market Review; perhaps we’ll see a little more accommodation developing to allow pension providers to guide their customers to helpful solutions. The forthcoming Drawdown Pathways may be indicative of the kind of support which will develop.
Next Steps
We’re supposed to get a Dashboard in 2019, but then we were supposed to leave the European Union on 29th March. Publication of the feasibility report last year was laughably late; maybe that was just a covert dress rehearsal for the Withdrawal Act. Who knows anymore.
MAPS will work with the pensions industry to scope out the technical framework, based on the consultation response.
When we get draft legislation, in the form of a Pensions Bill later this year the industry will properly swing behind this project. Until then it is likely to continue to be a coalition of the willing trying to drive it forwards, with those firms less interested in making it easy for customers to access their data able to carry on hiding behind strategic incompetence.
