An industry-built dashboard could deliver positive outcomes, with or without the government’s support
Everyone likes a positive story, but negative headlines sell. So perhaps it is not surprising that following the government’s wobble in its support for the pensions dashboard we are starting to see comments about why it won’t work anyway and how there’s no point in building it if everyone isn’t involved.
This contains a worrying hint of babies and bathwater – just because it isn’t perfect it deserves to be nurtured and shouldn’t be thrown out.
Don’t get me wrong, the dashboard absolutely would work better if every pension scheme was mandated to provide information and if the government drove the data and reporting standards. But pensions and technology providers have already put in a lot of effort and shown a surprising amount of unity in completing the first stages of the project. They could certainly deliver a workable model if required, with or without government “support”. An industry-built model would still deliver a number of positive outcomes which could provide the foundations for future development.
The industry model would most likely be driven by those who have already been involved in the project on a voluntary basis. Unsurprisingly, these are the companies where consumers can already access the information they need, albeit via a number of different sources.
This means the dashboard would probably not achieve the key objective of reuniting people with their forgotten pensions, since these are the least likely to be lost. What the volunteers could achieve – providing the regulators are on board – is agreement on how data will be collected and the initial roll-out of a consistent presentation format to their members and customers. This would be a pretty good start.
It would enable savers in more modern contracts to see the information they should be getting on all of their pensions and to become familiar with what it looks like. Once that has been achieved, pressure can then be put on those schemes and providers who have not joined the project to sign up.
Even without comprehensive coverage, the dashboard would still help schemes to engage with their members, help providers to keep in touch with their customers and, most importantly, help savers to understand what they need to do to achieve the best retirement they can afford. It is win-win-win and I cannot see any justification for not pushing ahead, even if the initial result is not the ideal scenario we would have liked.
The dashboard is not the only positive initiative to attract criticism because it will not single-handedly solve the problem it is aimed at addressing. The ban on cold calling, currently at draft stage, came about largely as a result of the campaign started by Red Circle Financial Planning director Darren Cooke and was heavily supported by pension professionals. Its detractors point out that the ban will not prevent scammers finding other ways of carrying on their activities, particularly from overseas.
It will, however, give us the chance to state, unequivocally, that consumers should ignore any cold call regarding their pension plans as they are not legal in the UK.
This is a strong message and highlights the fact that the industry is trying to protect its customers. It may be one step but it’s a step in the right direction. Even the most successful initiative in recent years, automatic enrolment, was rolled out in stages. If every employer had been forced to comply on the same date there would have been multiple systems or administration failures which could potentially have derailed the whole project.
If the initial minimum contribution rate had been 8 per cent, the opt-out rate would undoubtedly have been much higher than it is today. Yes, 8 per cent is not enough, but it has increased participation rates and provides a good base to build on.
I don’t think anyone foresaw in 2012 that the prevailing sentiment in 2018 would be that automatic enrolment is something everyone should have and those who are not included are missing out. Instead of having to deal with employees who resent being “forced” to save, we are faced with calls to widen the scope to include lower paid and self-employed workers. Building on success is easier than trying to do everything in one go.
Of course, these are only three instances of several innovations aimed at improving pensions in the UK. What they have in common is an objective which is centred round the individual saver and not the needs of the industry or government.
This in turn has led to a weight of support by those required to implement them so that participation is seen as a positive thing and avoidance as something to be questioned, if not actually sanctioned. Just what I’d like to see from the dashboard.
Fiona Tait is technical director at Intelligent Pensions