There is a good chance that by combining the two numbers in your mind you arrive at double figures. Changing jobs and moving home are both common factors when people become detached from their pension savings.
The long-term nature of pensions, and the opportunity to realise its value seeming so far away, means they are not always front of mind.
People engage with their bank current accounts, credit cards and insurance policies on at least an annual basis. Changes in circumstance, address and surname are updated along the way. But a pension rarely draws people’s attention on a regular basis and the information tied to it can fall out of date.
Experian runs the Unclaimed Assets Register, which helps reunite people with their lost financial assets and providers. More than 450,000 pension pots are recorded on the database.
Although we do not hold the value of these ‘lost’ assets, typically pensions savings on the register would be worth a few thousand pounds.
Key points
- More than 450,000 pension pots are recorded on the Unclaimed Assets Register
- For a pensions dashboard to work it needs to provide a complete picture of people's savings
- An incomplete pensions dashboard may lose half of its audience
Contributions tend to be made across a handful of years before an employee moved on to their next job and started with a new pension provider.
Data and the dashboard
The overall need for people to put away more in savings for later life is universally accepted. But progress can only begin when people are engaged with their savings and understand their current position.
The government has reiterated its commitment to a pensions dashboard, however the onus is on the industry to bring a solution forward before the end of 2019.
Experian worked on the government’s prototype dashboard and my view is that it is possible to deliver the dashboard before the deadline, although there is the need for haste to complete it inside 15 months.
A successful dashboard will allow people to review their retirement savings at a glance, showing them how much they have saved already and what it would translate to at their chosen retirement date.
However, for the dashboard to do its job it is crucial it shows all people’s savings and provides a complete picture. A survey carried out for Experian found more than one in four people said they would be unlikely to return to a dashboard if it only showed some and not all their pensions, while a further 19 per cent said they were unsure.
An incomplete dashboard could lose half its audience and that could create an industry white elephant.
The power of pinning
The responsibility lies with pension providers and pension schemes to ensure the data they input into the dashboard is accurate.
This is where a great deal of work is required – there is a duplication ratio of three to one on the provider databases we have reviewed which will need to be cleaned up for the dashboard to function properly.
For every million records, we have found 130,000 incorrect addresses, 5,952 clients who have already passed away and about 4,000 customers who have an initial rather than a forename.
Before feeding into the dashboard, organisations can get their data cleansed and remove those records that are now out of date or incorrect.
The cleansing process uses accounts which are live today – from credit cards to mortgages – to understand where the people who once put away for their future are now.
The technique of establishing who someone is and providing them with an identification number is known as ‘pinning’. It will also ensure any future records also follow them around through changes in job, address and surname.
Work carried out by Experian DataLabs helps us analyse and process data at speed.
As an example, we can now analyse up to 12 months of bank statement data in under a second, categorising income and sub-categories of income, as well as committed and discretionary expenditure.
To produce the experience customers expect, super-size analytics capability is a must.
Investing for the future
The dashboard should be looked at as an opportunity for providers to re-engage people who have a passive attitude to their retirement savings. If they need any more motivation, it makes commercial sense for organisations to encourage people to put more money away.
However, the dashboard brings risk as well as reward. The natural reaction for many people when they see a handful of pensions on their screen is to want to consolidate them into one, which logically will be easier for them to keep track of.
Clearly there will be winners and losers as people move through this process.
We asked people if they were to consider moving a series of smaller pensions savings accounts into just one, what would inform their decision.
The most persuasive aspect was not the charges for the service or analysis of past performance, but instead on the recognition of the brand and the strength of their relationship. We heard: “I know them and trust them” more frequently than “they will make me the most money”.
The answer for the brands that face being consolidated against is to improve their customer relationships through digital engagement, helping customers to manage their overall finances better, not just their pensions.
If you can help consumers to create more financial headroom through improved management of their credit card debt, or find them a more economical energy tariff, then it shows an ongoing interest in their finances and creates a tangible value exchange that in turn builds trust.
If a provider is trusted with finances today, it stands to reason they will be retained for tomorrow’s decisions.
Future financial services
Providers that fail to develop a digital relationship with their customers risk losing their custom to a third party who can successfully aggregate customer data and present a more compelling money service.
These third parties would then be in a position to influence people and advise on where their long-term savings might be best held – all without giving existing providers a chance to make their own case.
Market awareness about the power of building a digital relationship with customers is still comparatively low.
Yes, there are a number that have made good progress. But there are still many who have yet to fully appreciate the change that is now imminent, and those which have acknowledged it but struggle to plot a way forward.
It is important organisations in the financial services sector do not see the pensions dashboard as an isolated project.
Modern consumers expect to be able to see a wide range of information about their finances in an easy-to-understand way.
When the dashboard is created it will start as a tool for the pensions industry, but in time it could also be expanded to include a range of financial services – from Isas to stocks and shares and more.
The organisations that thrive in this open data environment will be the ones that act now so they are ready for a digital, data powered future.
Richard Howells is director of insurance, wealth, life and pensions at Experian
