A pensions dashboard prototype, which will allow savers to see all their pots in one place, has finally been delivered to Government.
A total of 17 pension firms and six technology companies, led by the Association of British Insurers, have been in months of talks over how the dashboard should look, and have agreed details on how it will run.
Consumers will confirm their identity using a process similar to the Government’s tax return systems, before sending a query to find all pension pots under the person’s details.
The state pension will be included, and the estimated value of all pots at a particular retirement age will be given. But challenges remain to turn the potential of the project to boost engagement with pension saving into a reality.
Show me the charges
While the dashboard will be able to provide illustrations of pension pots at retirement, it will not display provider charges.
Finance and Technology Research Centre director and dashboard steering group member Ian McKenna says there have been discussions around whether the dashboard should include information about exit fees or charges, amid predictions consumers will look to consolidate their pensions when they see all their pots in one place.
He says: “It will be important to make sure the level of information provided on the dashboard is such that people can’t make poor decisions as a result. We will have to make sure we give them all of the right information to take the right decisions. This is something where we have got to set expectations. If someone is expecting to see every bit of fund performance on the dashboard from day one, that is not going to happen.
“There is a process to go through to make sure we identify all the information that needs to be put forward, if it is information consumers need to help them take decisions. Exit charges is a good example.”
The Financial Inclusion Centre co-director and former FCA board member Mick McAteer says at the very least, a pensions dashboard “must be compatible with other packages that allow consumers to work out the potentially huge effect of charges.”
Aviva was one of the contributors to the dashboard project. Strategy and development director James Ward says he “doesn’t see any barriers” to Aviva, and possibly other providers, putting charges on the dashboard in the near future. But he admits fees will not feature at the outset.
Designing for decumulation
A further gap in coverage is although consumers can see all of their pots in the accumulation phase, the dashboard prototype has not been able to draw together multiple pots in drawdown.
Ward says this may also feature at a later stage, but the size of the task meant the group had to limit its ambitions to make sure a working prototype could be delivered on time.
He says: “For the scale of the project, it’s important we keep things simple. There are all sorts of things we would like to add, additional data, types of product. In due course I hope we will be able to do those things, but if you load too much into the first deliverables, you might fall flat on your face.”
Standard Life head of adviser and wealth manager propositions David Tiller acknowledges the limits of the current dashboard capabilities.
He says: “In a world where people are remaining invested through retirement, it would make sense they could see everything. At the moment, the dashboard is just building through valuations. There needs to be thought given to what information is pulled through and how you reconcile different types of pension and present things in a standardised way, which is quite challenging.
“It is easy to slip into doing the illustrations of values rather than actual values.”
Finally, the dashboard as it stands will not include details of public sector defined benefit schemes.
Concerns have been raised that DB schemes are rarely built with the capacity to deliver live data. Some have questioned if the prototype at this stage is not providing contact details for consumers’ schemes, will the dashboard be able to tackle this seemingly larger barrier in future?
But Ward says: “Both DB and DC have their own challenges. For DB, a lot of the big administrators and IT providers were very intimately involved in the project. They cover a large majority of DB members. If they are getting involved, building it into their own systems, it wouldn’t be as difficult for trustees and administrators as people think.”
Winners and losers
There are two sides to the debate on whether the dashboard will help advisers. One school of thought suggests that, once consumers have a far clearer idea of their pots, they will be more likely to make their own decisions about them and not want to seek an adviser. The other is that once engaged, consumers will want to see an adviser to get the most out of the pots they now have a better understanding of.
Ward says: “I certainly don’t think this is going to undermine the case for advice. It will prompt more people to see the benefit of taking advice. If we do it right, you will see a significant reduction in the cost of that advice, taking out a lot of the drudge work of collecting information from multiple pension providers and schemes.”
Adviser view: Delta Financial Management financial planner Jarrod Ellis
More information is good, but more education around why people need advice is better. As I always say to clients, if you view it as DIY surgery, would you do it? People know very well the dangers of DIY surgery, but they aren’t educated about the pros and cons of advice. With knowledge comes power. The dashboard might empower some people to take action, and if it does I’m all for it.
Providers may benefit overall from more engaged savers, but lose out on “captive” business as a result of the dashboard’s introduction.
ITM, one of the technology partners in the prototype, says some providers will inevitably lose out.
Chairman Duncan Howorth says: “While the dashboard will be of benefit to consumers, it is not of benefit to everybody because this gives people information to make choices.
“One of the things I would expect to come out of this is people will consolidate their different pension pots.
“When you have consolidation like that, there are winners and losers.”
The providers that agreed to help fund the project will have benefited from having a hand in its design. Ward says the amounts paid to the ABI were “relatively small sums” and, because more contributors ended up feeding into the project than initially anticipated, firms may in fact receive a slight discount on the £50,000 each provider pledged to the ABI. However, further stages of the project are likely to incur additional costs.
The scale of the challenges still to overcome raises the question as to whether, at some point, the Government will have to compel providers through legislation or regulation.
Ward says it is more likely that good practice guides or other nudges will be used before full intervention, but that compulsory mandates from the Government would not be unwelcome across all providers.
Expert view: Industry needs to decide who pays
Altus director Ben Cocks
Providers joined the dashboard project either as an altruistic move to help bring new benefits to UK citizens, or to influence the way in which it is designed and developed. Either way, with so many key decisions outstanding, it is probably too early to say whether it has been value for money.
This initial funding will certainly not be enough to see the dashboard project through to completion but any more funding is unlikely to come from further voluntary donations from these providers.
There has been a lot of debate on the technology but rather less on the question of who pays. Many providers want Government funding, at least to cover the start-up costs, but this seems unlikely.
Our view is everyone should be responsible for their own costs with minimal central funding. Provided a model is adopted that allows for competition between technology suppliers, then pension providers and dashboard services are free to select their own preferred technology supplier. With each party having control over their own costs there is a much better chance of a cost-effective outcome.
At a launch event a few months ago, the Treasury announced charges would be included on the dashboard but this has since slipped out of scope. From a technology perspective it would be very easy to implement, but the challenge is to get agreement on a common means of describing complex pension charges in a way that would allow members to compare providers fairly.
It would be straightforward to include at least some information on pensions in decumulation on the dashboard and I am surprised this has been left out of scope.
If the dashboard gets off the ground, then we should expect the scope to be extended fairly soon afterwards.