After making excellent progress over the past 12 months, the pensions dashboard project slowed in the latter half of 2017. It is now under the leadership of the Department for Work and Pensions, which announced a fresh consultation on the best way to take it forward in December.
This is a valuable opportunity for the industry to unite to identify how to deliver dashboards that will best meet the needs of consumers. Each of the following should significantly assist this objective.
1. Deliver dashboards from the widest range of organisations
Throughout the Treasury leadership of the project, the federated model – where dashboards would be delivered by a wide range of organisations including pension providers, advisers or any other organisation with suitable credentials that can meet the security standards – was the chosen approach.
This is now by no means assured. Indeed, in the run up to the recent DWP event, it was being widely briefed that there might only be a single dashboard run by the new Single Guidance Body.
To be fair, the DWP insisted at the event that it is open minded on the subject, although pensions minister Guy Opperman consistently referred to the dashboard singular, as opposed to plural. Having only a single dashboard will constrain consumer choice.
Presented with the full value of their collective pensions, many will ask “so what should I do?”. Making dashboards available via a wide range of organisations will make it far easier for consumers to get answers to these questions.
To be a success, dashboards must achieve active consumer engagement. This will not happen if we give them information but no way of getting answers to the inevitable questions this will raise. A wide range of organisations can play a valuable role in providing these answers.
2. Single Guidance Body must collaborate with advisers, not compete
The relationship between the Money Advice Service and advisers was fraught at the best of times. The MAS leadership consistently alienated advice firms by positioning itself as an alternative to advice.
Given such services will never have unlimited resources, it must be far more productive for the new Single Guidance Body to find ways to work with the advice community, so it can focus on those who cannot afford advice.
Supporting the delivery of federated dashboards would be a great way for the new body to demonstrate a desire to work with other parts of the industry.
Conversely, creating an environment where consumers can access more information from the Single Guidance Body than they can from advisers (as will be the case if we have a Single Guidance Body only dashboard) will only perpetuate the competitive model and significantly inhibit the ability to reduce the cost of advice.
3. Phase the introduction of compulsion for different types of pension providers and the level of detail required
While it is widely recognised compulsion will be essential if we are to present consumers with a full picture of their retirement provision, providing this information will place considerable strain on certain types of pension providers, especially defined benefit and some other trust based schemes.
Rather than demanding a “big bang” approach, these organisations should be allowed to phase their participation, perhaps initially identifying they hold benefits for an individual, with a requirement they increase the level of information delivered over the next couple of years.
4. Deliver initial services to support auto-enrolment members
This April, and again 12 months later, auto-enrolment scheme members will experience substantial increases in their contributions. Young consumers with high job mobility are a natural audience for dashboard type services.
Many will already have been members of multiple schemes but with paper being the standard way information is sent to them, they may struggle to recognise their combined value. It is crucial they realise the benefits of not opting out as the increases kick in.
All the auto-enrolment providers that participated in the ABI pensions dashboard project already have the ability to provide the necessary information to individual scheme members. To evolve this to aggregate information from multiple schemes would be a very simple task.
I have spoken to several technology suppliers that could deliver initial dashboard services in this way in just a few months. This represents an obvious quick win and could be a great way to move both the contract and trust based pensions community forward as dashboard providers.
Were such moves embraced by The Pension Regulator, support for auto-enrolment dashboards could become a requirement for qualifying workplace pension schemes. In time, this requirement could be extended to other types of schemes phased over suitable timescales, as suggested above, thus providing a foundation for implementing compulsion at a pace all providers could support.
The dashboard project represents a huge opportunity to increase consumer engagement with their pensions and encourage them to make better provision for their income needs in retirement. But to achieve its full potential, industry, Government and non-government organisations must work together.
While I firmly believe the above steps will greatly benefit consumers, I do not believe any of them are currently part of the DWP plan. If you agree with my proposals, I would urge you to make your views clear to the DWP as a matter of urgency. We have the opportunity to influence the direction of this essential project but only if we make our case clearly.
Ian McKenna is director at Finance & Technology Research Centre