IBM’s plan for a national citizen’s pension portal is an exciting idea. The goal of a single screen showing all an individual’s pensions, whether they are state, personal or occupational, is a compelling objective.
Done right, it could also answer many of the Government’s questions over small pots, member engagement and the public’s attitude to long-term savings. And it could even facilitate more cost-effective delivery of RDR advice.
The concept is gaining support in many parts of the industry although resistance to it is fierce in some quarters.
There are two reasons for this resistance. First, the radical nature of what is proposed. IBM wants to create an aggregated view of all state and private pensions housed in a portal offering educational tools designed to increase consumer engagement, facilitate consumerinitiated transfers and boost competition in the market.
For closed book players, this would potentially open the prison gates to billions of pounds worth of assets currently locked up through inertia. This argument against IBM’s portal plan is unlikely to worry policymakers and rightly so.
The second reason for opposition is a belief that it is an attempt to water down the Government’s zeal for reform on the question of small pots.
Several of the providers which support the portal proposal are, I believe, among those who do not like the idea of the “pot follows member” option in the Government’s small pot consultation. I understand the suspicions of those concerned but only to an extent.
If the portal was in place today, then two of the objectives of the small pots consultation, that of an overall view of their pension savings and easier transfers, would already be met. No need, therefore, one might argue, to proceed with anything as drastic as small or any pot follows member.
But the IBM proposal does not of itself preclude mandatory amalgamation of small pots. In fact, it could be a relatively quick way to get to a point where we have the connectivity where small pots can quickly and effectively be merged.
Australia, which is 20 years down the line with dealing with compulsion, is a case in point. There is a website where Australians can go and see all their Super-funds in one place, a concept not a million miles from what IBM is proposing. But the Australian experience is that, like so many other well meaning yet on the face of it dull websites, nobody uses it.
That is why from next year it is introducing auto-consolidation, which will aggregate small funds that have not been touched for two years unless the individual specifically requests they remain separate
You could say the Australian experience shows why we need to go straight to an aggregator or pot follows member option.
Maybe we do but the added benefit of the national pension portal is that it would, given the right Government backing, be able to cover legacy pensions as well as occupational and state pension too. Whatever advice models emerge after the RDR, it will be far easier to service those on middle incomes if all their information is visible in one place at the first meeting with the adviser.
The industry does not necessarily face an either/or question here. IBM seems to think it can deliver this consumer pensions portal relatively quickly. Yes, there will be issues to iron out along the way but it is an idea that deserves some air time.
John Greenwood is editor of Corporate Adviser