An ambitious undertaking that could help to transform the way people prepare for retirement – the notion of a pensions dashboard for UK savers dates back more than 20 years. The upsides are a smoother and simpler savings experience, but the journey has been tumultuous and complex.
Bringing together a complex range of financial data from a number of different providers was always going to be a challenge, but with equivalent service models up-and-running in countries across Scandinavia, as well as the likes of Australia, Belgium and Israel, the UK is right to drive through delivery of the dashboard.
Having pensions information at the touch of a screen will ensure better-informed, more engaged savers Guy OppermanFor the first time, savers would have access to all of their retirement savings information – including personal, state and workplace pensions information – in one place. This one-stop digital portal for individuals to access and view their pensions and savings information could “revolutionise” the way people prepare for later life.
According to pensions minister Guy Opperman: “Having pensions information at the touch of a screen will ensure better-informed, more engaged savers and help many more people to plan effectively for retirement.
“Bringing pensions information into the digital age has the potential to revolutionise the way we all think about and plan for later life.”
Visibility over all of their entitlements, in one place, and insight into whether they are projected to be saving enough for retirement is something people really value. Aside from the overview and control of retirement finances that it provides, the dashboard will also allow people to keep track of savings from pension pots that would otherwise disappear into the ether.
According to research from the Pensions Policy Institute on behalf of the Association of British Insurers, as many as 1.6m pension pots are “lost” and at risk of remaining unclaimed – adding up to an estimated £20bn in lost savings.
The concept undoubtedly sounds great. Those responsible for implementation have, however, identified a myriad of challenges and questions around governance, compulsion, regulation, funding and launch timing. It is important that these are addressed and overcome.
Government commitment to the project has also been questioned, despite Prime Minister Theresa May and Mr Opperman pledging their support. However, with the Department for Work and Pensions handing delivery responsibility over to industry, and a 2019 launch date still fixed, crunch time is upon us.
Launch hopes and expectations
Whatever shape the initial dashboard takes at launch, we should expect a tool that prioritises simplicity and presents key data in a straightforward intuitive fashion.
Merely giving people digital access to this information should breed positive results in terms of the average person’s awareness of, and engagement with, their retirement savings. Even if the dashboard acts only as a prompt or reminder for more people to keep retirement savings in mind, it will have ushered in a new dawn in pensions planning.
The likelihood is that the launch version of the dashboard resembles the prototype models put together by the ABI in conjunction with the Pension and Lifetime Savings Association and technology companies like Origo.
The focus for the prototype was a simple, accessible portal but one that must be ready to support at least 15m consumers accessing their pensions data.
Done well, the dashboard has the potential to take engagement to the next level, capitalising on peoples’ appetite for digital financial tools.
While people are increasingly accustomed to using apps and similar personal finance platforms, the dashboard must be a tool to inspire the tech-savvy, but must also be simple enough for the non-technologically-minded to navigate.
The handling of large amounts of data may ultimately dictate the success or failure of the project. For the project to be successful, consumers must have confidence that their personal data will be secure and that hackers, scammers and others with ulterior motives are not able to exploit the dashboard for their nefarious purposes.
Scope of coverage
It really is utterly reprehensible, in 2019, to hear that data on state pension entitlements may not be available at launch. It will be compulsory for private pension providers to input information for the dashboard, recognising that, without compulsion, some providers may have been put off by the daunting task of ensuring the provision of clean, accurate data. The same should apply to state pension data.
The dashboard also presents a great opportunity – and incentive – for the government to grasp the nettle on defined benefit pensions.
Successive layers of regulatory complexity over the past 40 years or so have made DB pensions incomprehensible to all but a handful of pension experts – and that was before schemes set off on the wholly unappetising task of guaranteed minimum pension equalisation.
But there is a way to start to make DB pensions understandable to ordinary people again. In November 2018, Sir Steve Webb, former pensions minister and director of policy at Royal London, and the Association of Consulting Actuaries published their joint paper ‘Simplifying pension benefits – is it time for the pensions pound?’, which sets out the case for radical simplification of DB pensions and describes how it could be achieved.
Key Points
- The upside of a pensions dashboard is a smoother and simpler savings experience
- Giving people digital access to this information should breed positive results in terms of the average person’s awareness of their retirement savings
- One has to ensure that there are enough caveats and guidance so that people do not place undue reliance on projections
A simplified DB structure would not only help to engage individuals with their DB savings, but a simplified DB pension could be displayed sensibly on the pensions dashboard. That is the ultimate prize – all pension benefits, state, defined contribution and defined benefit displayed in a single readable simple format.
‘What if’ projections
Providing people with a consolidated statement of their savings will be a huge step forward. To make that data even more meaningful, the dashboard should translate savings into an income during retirement. After all, that is what pension saving is for.
There is a balance to be struck between keeping things simple and showing information that ordinary people can relate to and, on the other hand, including sufficient caveats and guidance so that people do not place undue reliance on projections.
Care will also be needed with different commercial dashboard providers to avoid ‘model arbitrage’ where consumers gravitate to the dashboard that shows the most favourable projection of their retirement income.
Naturally, there will be some learnings – and improvements – to be made post-launch. As time goes by the dashboard will become more comprehensive, more user-friendly, and more relevant to larger numbers of people.
However, the way that the dashboard launch is communicated will also be important to make sure it gets off to a good start.
In Australia, for example, the government’s online portal also provides a helpful video tutorial, courtesy of the Australian tax authorities, which acts as a visual explainer.
This is useful in getting the balance right between the technical capabilities of the portal and its practical usability.
The overriding hope for the project is that it succeeds in bringing people closer to their savings. The goal is to inspire and empower people to track, monitor and invest – in every sense – in their pensions.
The success of the dashboard project could serve as a compelling case study of just how powerful the application of technology can be when it comes to making retirement saving easier, and more universal, than ever before. The key learnings are likely to be logistical, rather than ideological.
Bob Scott is senior partner at LCP
