The pensions dashboard is a simple idea that seems to have become increasingly complicated. It was devised as a way of people being able to see all their pensions in one place, including those they may have lost touch with over time, so they could make informed decisions about them.
However, making the pensions dashboard a reality has thrown up various problems, many of which were highlighted in the Pensions Dashboard Project report “Reconnecting people with their pensions”, recently published by the Association of British Insurers.
In his speech at the Pensions and Lifetime Savings Association annual conference last week, pensions minister Guy Opperman announced the Department for Work & Pensions would conduct a dashboard feasibility study, with consultation on issues such as timing, data, cost and regulation “at pace”.
The industry was pleased to hear the Government finally decide to move the dashboard forward given the silence that had followed the June general election. However, Opperman acknowledged we remain “some way off” from a working solution. So, what are the major obstacles in the way and how can they be overcome?
The complete picture
Many commentators point out that the dashboard will only be as useful as the information on it, so all pension providers need to be on board to provide all information. But with some dragging their heels, perhaps the only way to achieve this is compulsion.
“A number of schemes and providers have told us privately that they don’t intend to share their data with the dashboard unless it’s compulsory. Some won’t do it because their business model is about keeping customers sleepy and some because they’re not sure their trust deed allows them to spend money investing in projects like the dashboard,” says NOW: Pensions director of policy Adrian Boulding.
“It’s not the case that all providers need to be on there from day one, but the ambition has to be for all pension savings to be visible. The only way to do this is to make it compulsory for all schemes to share data with the dashboard.”
Aegon head of pensions Kate Smith agrees. “Not all pension providers have signed up and agreed to release their data, so immediately the customer is going to think it’s not doing what it promised and that they’ve had a poor experience,” she says.
“The only way around this is to legislate. If we had legislation or a timeline for more parts of the industry to come on board, people would have more confidence in it and more would use it. But without that trigger its difficult.”
Intelligent Pensions head of pathways Andrew Pennie saw the ABI report as a challenge to the Government, asking ‘do you want the dashboard to work or not?’.
“It is virtually impossible to see how a voluntary code to provide data would work, as there is no incentive for closed insurance companies and pension schemes to incur additional costs providing it in a new format and through new electronic links on the dashboard. Gaps in data on the dashboard would quickly render it worthless and pointless,” he says.
One of the issues examined in the ABI report is the practicalities of delivering the “minimum viable product” at launch (described as “the simplest services which might be designed which delivers value to consumers”) rather than full functionality.
Launching with full functionality by the 2019 deadline is regarded as a tall order, particularly as you can only build some functions and make improvements once people start using the dashboard.
PA Consulting Group pensions expert Mike Teall believes that, although the rollout will need to be phased, the dashboard could still be useful from day one – as the ABI’s prototype has shown. However, he says the ABI research lacks a segmented view of how useful it could be.
“An audience of over-55s approaching retirement with a mixture of defined benefit and defined contribution pots, potentially approaching their lifetime allowance, may be deterred by a lack of DB functionality. But perhaps for the under-30s, moving from one DC auto-enrolment scheme to the next with minimal savings in each, there could be some immediate benefit of viewing combined savings, understanding their growing but insufficient wealth, and engaging in retirement savings like never before,” he says.
Royal London director of policy Steve Webb feels it should not be beyond the industry to deliver a version over the next couple of years that will at least enable people to see most of their pensions in one place.
“Given the potential for delay, it is important to get something up and running which can be refined. Even with a basic version, clients could sit with their adviser and log in to the dashboard so the adviser could then see all the relevant information,” he says.
Punter Southall Aspire managing director, proposition development, Stephen Greenstreet says the plan to have multiple dashboards run by commercial firms, rather than a single centralised dashboard could confuse consumers.
“The dashboard needs to be consistent in terms of the information provided, but this could be an issue with providers and schemes using different charges and growth rate assumptions,” he says.
For the People’s Pension head of policy Darren Philp, who led the consumer group research in the ABI report, there needs to be an independent “public good” dashboard run by a finance body to generate public confidence before other providers are allowed to move in and innovate.
“If you don’t have a public good dashboard you’re opening the door to scammers and people who want to rip people off,” he says.
Promoting informed decisions
Encouraging people to engage with the dashboard is another challenge.
“It’s been shown time and time again that just giving people information isn’t enough if you want them to take action,” says Wealth Wizards director Phil Blows.
“It has to be put to them as: ‘this is what you’ve said you want, we’ll help you, but this is what you need to do to get there’. It would be great if you could press a button and it’s done for you but this is the role of the financial adviser.”
Blows is also worried how inclusive the dashboard will be, given many of the old legacy pensions will never have been digitalised.
Some advisers wonder where people who have all their pensions information will go for help in making the informed decisions the dashboard is designed to encourage.
Pennie says: “Undoubtedly people will be better informed, however, it is probably better to think of the dashboard as a first step towards better decision making than a total solution.
“Guidance can only tell someone what they could do and more people would benefit from regulated advice to identify what they should do, coupled with the added peace of mind that comes with full regulatory protection. A link between the pension dashboard and advice, both in terms of encouragement and nudging, will be needed if better decisions and retirement outcomes are to be achieved.”
That said, Selectapension national accounts director Peter Bradshaw is concerned there may not be enough advisers to meet the demand. “There could be an issue if demand for the dashboard rockets and is not matched by the supply of advice or guidance, so the industry needs to consider how that demand might be met,” he says.
Adviser view: Neil Moles, managing director, Progeny Group
A major challenge is getting legacy pension companies to commit to going live with this and forcing them through legislation to comply. We’ve also got to look at who is going to advise people. Have we thought about a guidance service that can talk people through it? The size of the legacy pension problem is billions of pounds and there’s nowhere near enough advisers to deal with this. We could be waking a sleeping giant.
Adviser view: Lesley James, managing director, Simplified Money
The biggest issue will be getting the necessary support from all the different providers. Legislation should be put in place to make providers and schemes participate – even if that means lowering the initial requirements for data feeds and slowly improving them over time. But these issues need to be faced by providers anyway. The march of robo-advice means that, if they don’t get their systems organised, their business will soon start to disappear.