With the infrastructure already available as part of open banking, it will pay to be smart rather than siloed
News that the government will “leave it to the industry” to progress the pensions dashboard is generally positive. However, it raises as many questions as it answers, one of the most important being: what is the most productive way to make it a reality?
Multiple organisations will want to throw their hats into the ring to play key roles. But in considering the best way forward, they must recognise that the world has moved on since the pensions dashboard prototype was delivered at the end of Q1 2017.
While the project has spent the past 18 months in suspended animation, other digital finance initiatives have made substantial progress. An excellent example of this is the open banking project. While not proceeding entirely to timescale, it is delivering remarkably well for such a substantial operation.
It now has in place a robust approach to data ownership, consent, liability, legal and regulatory structures, technical standards, governance, finding and implementation. Any pension dashboard project is going to need to address all of these issues.
There are also a range of governance groups and an independent trustee that can take the ultimate decision on any matters where the parties cannot agree.
If all this infrastructure exists to support open banking, does it make sense to build the components again from scratch to support the pensions dashboard? Then perhaps again for a similar service for non-pension savings vehicles, then a fourth time for protection and a fifth to add mortgages and loans? Lots of nice jobs in quangos for some but a whole load of entirely avoidable costs.
I understand a similar project around universal credit and employers’ statements to identify protection cover provided to employees is also being advocated by various parties, including the Association of British Insurers. Anything that makes people more aware of the extent of cover they have is a good thing, but we must be careful not to create yet another siloed structure duplicating what will already have been built.
The Tax Incentivised Savings Association is among players that have also been looking at how other areas of the savings and investment market can be similarly enabled. Laudable indeed, but these projects need to be joined up. The smart way to take the dashboard and any other services like this forward is to build on what has already been created for open banking, developing an open personal finance architecture.
Because the open banking process was created under the auspice of the Competition and Markets Authority, consumers have been kept firmly in mind every step of the way. Why would the pensions, protection and savings community not want to benefit from that?
All stakeholders will need to have confidence they will be fairly represented, which will necessitate the current governance structure of the open banking project being significantly extended to include life companies, platforms, asset managers, and so on.
Extending it should also make full use of existing data standards where possible. For instance, the Criterion (formerly Origo) Standards should be adapted and reused wherever possible.
So far, more than £100m has been spent to develop open banking. Initially, the banks have had to meet this cost but, going forward, they are keen to share it across a wider constituency. I understand an approach has been identified to split between organisations large and small proportionate to their size.
So, the industry should do all it can to make use of any complementary infrastructure that already exists, rather than reinventing new wheels.
Fintech suppliers have a lot on offer to help advisers deliver holistic analysis of their clients’ financial solutions. Intelliflo and True Potential have significant embedded personal financial management capability and Moneyinfo offers similar standalone tools.
Having to use one set of protocols for open banking data, another for pensions and yet another for the likes of protection will drive up costs, which will ultimately be passed on to consumers.
It makes far more sense to be smart, rather than siloed. Providers and advisers must collaborate in developing open standards that can be adopted across the spectrum, reducing costs, promoting competition and delivering a better consumer experience.
Ian McKenna is director of the Finance and Technology Research Centre