Pension dashboards: full steam ahead
For adviser and employer use only
Pension dashboards will not only generate interest in pensions, they also have the potential to transform pension saving - both for consumers and advisers. Providing a clear view of pension pots at a glance, saving time and effort and making advice more affordable. Failing to keep track of savings is a significant barrier to effective financial management - the Pension Tracing Service estimates that there’s over £5 billion in lost pensions, highlighting a clear need for innovative technology, such as the dashboard.
It looked like the growing momentum behind the concept of pension dashboards had become a Brexit casualty after the government appeared to pull back from the project following the June election. However, on 19 October, Guy Opperman, the Pension Minister, breathed new life into the initiative by announcing that the Department of Work and Pensions (DWP) will take over the lead of the Pension Dashboard Project Team from the Treasury.
The plan is that the first pension dashboards, which will link into a pension finder service, will become a reality in 2019. The prototype rolled out successfully this year, demonstrating that the technology works. However, despite government backing the project faces many challenges
The vision is that pension dashboards will help people find and engage with their pensions, empowering them to make decisions during their saving lifetime, ultimately helping them get ready for retirement. People will be able to see all their pensions online in one place, their State Pension, defined contribution (DC), defined benefit (DB) pensions, both old and new - at least, that’s the idea.
Due to automatic enrolment, pretty much every job now comes with a pension. People on average will have 11 employers throughout their working life and it can be difficult for people to keep track of their numerous pensions they’ve saved into over the years. The pension dashboard will mean that ‘lost’ pensions become a thing of the past.
These innovations should mean that advice becomes more cost-effective but, in addition to making life easier for adviser firms, the dashboard could increase the demand for financial advice as a whole. By highlighting the complex decisions that people face, it’s possible that the dashboard could actually encourage people to seek the advice and support they need to guide them through the waters of planning for their retirement. According to our Adviser Attitudes Report, a quarter (26%) of advisers see dashboards as a major opportunity over the coming two years.
Pension Dashboard Projects’ Team report and research
Earlier this month, the Pensions Dashboard Project Team published a report setting out a 2019 roadmap. This identified the key objective, that citizens should have a right to access information about all of their pensions, in one place, in a standardised digital format of their choice, through regulated services.
Over the summer, the project team carried out research with a range of stakeholders including consumers, trade and consumer organisations and senior industry stakeholders. It has also worked closely with the industry and regulators to refine data standards and guidelines. And, based on its findings, the project team has identified 10 recommendations for what should happen next.
The project’s 10 recommendations
- All pension providers and schemes must make data available to consumers through regulated third parties, including occupational, personal and public service pension schemes. Legislation would be required to make provision of data compulsory.
- DWP must make State Pension data available from day one.
- A non-commercial service, endorsed by the government, must be made available. It’s possible this could be provided by the new single public guidance body which is due to be set up late 2018 / 2019. One size won’t fit all so third parties would also be able to provide tools, products and services.
- To enable innovation, the government must enable “open pensions” infrastructure that allows consumers to access their data via regulated third parties.
- Regulation of pension dashboards and any other third party services showing consumers their data is essential to ensure consistency and consumer protection. Financial Conduct Authority (FCA) was identified as the most likely regulator.
- There must be a clear implementation plan and timetable, endorsed by Government and industry, including an approach to funding implementation and a major communication programme
- An implementation entity must be charged with delivering the service. This will include setting up a governance body which oversees the network, establishes and manages data standards, data security, and data sharing agreements and which is sustainably funded. This could be along the lines of the entities set up to deliver NEST (PADA) or Open Banking standards.
- Data must be made available in a standardised digitally consumable format, with agreed standards mandated by Government and regulators.
- A Pension Finder service such as the one used for the prototype, must be set up to link schemes to dashboard providers.
- An identity assurance must be agreed. It’s expected that a private sector equivalent of GOV.UK Verify will be developed.
The ability for technology to transform the advice sector is significant, and if dashboards are implemented successfully, they have the potential to be revolutionary, not just for savers but also for advisers. To get the dashboard plans off the starting blocks, it’s expected they will start with limited functionality and develop over time. It’s likely that a phased approach will be adopted, with DC providers and schemes being early adopters, alongside the State Pension, followed by DB schemes, including public sector schemes at a later date. Legislation will be needed to enable full industry coverage, showing all schemes and the value held within each, but realistically this is unlikely to happen from day one. At the very least it would be helpful for the government to signal its intention to legislate at a future date.
A big bang approach brings implementation risk, with the possibility of the project not only being delayed but potentially falling over entirely, leading to a loss of consumer and adviser confidence.
Dashboards will, no doubt, develop over time, perhaps expanding to include investment options such as ISAs and income drawdown, and customer services such as delegated access for advisers, as well as online tools. The lack of delegated access in early versions of the dashboard isn’t likely to be an unsurmountable barrier to advisers helping their customers with retirement decisions. Marketing around the dashboards is likely to promote the value of advice and guidance, signposting people to where they can get help. And customers should be able to log on to a dashboard of their choice anyplace, anytime, including while with their adviser.
Now that the DWP has confirmed that it will lead the pension dashboard project it’s full steam ahead. The DWP will now lead a feasibility study looking into the recommendations made by the project. Hopefully, this will include full consultation with the pension industry and a roadmap towards full implementation. This must include compelling all pension providers, schemes, including public sector schemes and the State Pension to release data to the dashboard of the customer’s choice.