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Ian McKenna: Pension dashboard needs a savings boost

Ian McKennaThe benefits of presenting data from the pension dashboard needs to be put side by side with savers’ bank accounts

The government finally revealed its plans for the pension dashboard project earlier this month and the details, which include a commitment to multiple dashboards and to delegated adviser access, are positive for both advisers and clients.

There are apparently legal reasons why the open banking implementation entity, set up by the Competition and Markets Authority to push banks into being involved, cannot be extended to the pension dashboard scheme. However, there are many valuable lessons that can be learned from open banking.

The benefits of presenting information from the pension dashboard and open banking side by side should not be understated. At a broader level, it will provide a major opportunity to enhance consumers’ understanding of their savings, helping reduce financial exclusion and improve the UK’s savings ratio.

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From an adviser perspective, firms will be able to deliver a far more comprehensive picture of their clients’ financial lives. Advisers are ideally placed to offer this as a core part of their proposition and it is vital they recognise this, as banks will be supplying the same aggregated view.

I understand Lloyds has already conducted a pilot where it made information on Scottish Widows pensions available, alongside consumers’ online banking.

Apparently, the rise in engagement with the pensions data was off the scale. Of course, anything that increases engagement with pensions must be seen as a good thing, but advisers should be looking to deliver the same experience as banks, or they will be at a commercial disadvantage.

Containing costs

Making use of the capabilities already created for open banking should deliver dashboards faster and at a lower cost.

Many of the questions that still need to be addressed for the pension dashboard (such as around governance and funding, ownership of customer data, customer consents, liability and monitoring) have already been addressed for open banking.

Even if we cannot use the same implementation entity, it surely makes sense to learn from the process.

Some £500m has already been spent building the infrastructure for open banking. The more that can be reused, the more costs can be contained. After all, the industry is expected to fund the cost of the dashboards, so these economies should make sense.

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One area that does concern me is the requirement for the initial non-commercial dashboard hosted by the new Single Financial Guidance Body to be delivered before the commercial ones.

With the SFGB not coming into existence until January, this may impact timescales.

I can entirely see the necessary security and regulatory requirements must be in place before commercial dashboards can operate but, again, we can learn from open banking here.

Assuming the security requirements around open banking are adequate (and I would be staggered if they are not), the account information service provider permissions created by the FCA could easily be extended to cover dashboard data too, if they do not already do so.

Micro-savings boom

It is clear consumers need to be given new ways to engage with savings, and micro-savings are fast becoming a golden opportunity to achieve this.

The more I look at the varying practices of the growing online and app-based advice community, the more I am convinced we can enable very different ways for consumers to start saving.

It is looking more and more like the original robos, such as Scalable Capital, Nutmeg and Wealthify, are more an evolution of the online self-service model, currently dominated by Hargreaves Lansdown, than a real disturbance in the savings market.

Genuine disturbance will come through changing the way people think about their money generally, and savings in particular.

The big challenge for the first-generation robos has been the cost of customer acquisition, with these firms spending vast amounts attracting just a few tens of thousands of people.

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In less time, the micro-savings community has attracted many hundreds of thousands of new savers by taking a very different approach, allowing them to save what they feel comfortable with when they feel able, albeit regularly prompted in different ways.

Allowing people to save a little and often does not have to replace regular saving, but it can be a great way to complement it.

It is my understanding pensions minister Guy Opperman specifically asked the prime minister to add financial inclusion to his brief when he took up his post.

Pension dashboards are addressing that extra role.

Ian McKenna is director of the Financial Technology Research Centre

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