An online system that allows people to view their retirement savings in one place is both doable and overdue. Jenna Gadhavi explores how the industry can make sure the dashboard project delivers
More than a third of people approaching retirement do not have any idea of the pension savings they have, according to research from the Treasury. This can come as no surprise, given that most people in the UK now work for a number of different employers throughout their working lives.
The advent of auto-enrolment also means that there are now people in part-time jobs who are building up a number of pension arrangements simultaneously, also with different employers. Many in the industry believe that pensions dashboards are the answer.
Simply put, a dashboard aggregates people’s pensions and shows them their total retirement savings. Helping people track and understand how much they have in their pension pots could ultimately make the difference between having sufficient savings for a comfortable retirement and falling short.
And it seems that with the launch of the HM Treasury’s steering group for the pensions dashboard prototype project in September this year, we are inching ever closer to this becoming a reality. However, we in the UK are not trailblazers in this field, so what lessons can we learn from countries that have already set up a pensions dashboard?
Learning from our neighbours
“It’s an obvious thing to say, but the first lesson is that it’s doable,” says Darren Philp, director of policy and market engagement at The People’s Pension. While the UK tackles perceived barriers such as data quality, lack of trust in pension providers, and cyber security, there are many countries where dashboards are already working well.
Compulsion is driving success in other countries
People in Sweden, the Netherlands and Australia all use them successfully, and are able to go to a single website to view most, if not all, of their pensions in one single place. Margaret Snowdon, chair of the Pensions Administration Standards Association (PASA), and member of the dashboard steering group, believes that compulsion is driving success in other countries.
She says: “The existing dashboards that have been most successful are ones where there has been some element of compulsion – where the government has said you must provide this information, and if you don’t there will be consequences.”
Auto-enrolment has proven just how effective compulsion versus voluntary participation can be
Sweden is a good example of this. Although not driven by legislation, the Swedish government made it clear that if pension providers don’t provide the information requested, regulation will be introduced. Snowdon says: “We’re not there yet in the UK and at this stage it’s voluntary, but we can definitely learn from what’s being done elsewhere. Auto-enrolment has proven just how effective compulsion versus voluntary participation can be, and this could be key to the success of dashboards in the future.”
However, Snowdon does highlight a barrier. The UK has a very fragmented pensions landscape with many small and medium-sized schemes. This could make it trickier to introduce a dashboard because it’s far easier to pull together information from fewer, larger schemes, than many smaller ones.
You need a driving force that the industry and wider stakeholders can rally around
Again though, the UK can learn from places such as Australia, where a dashboard was created to help consolidate multiple small pension pots through mandatory saving into superannuation schemes, and has proved very successful. Philp thinks that we should be clear about our objectives from the outset. He says: “You need a reason to do it – a driving force that the industry and wider stakeholders can rally around. We now have the government showing commitment, which is good, and many stakeholders are involved in driving this forward.”
Legislation also seems to be required to make sure consumers are properly protected and to ensure appropriate governance is in place. Philp thinks that the UK government will also eventually have to legislate to ensure all pensions are covered. He says: “We’ll get good coverage quite quickly, but we’ll need pretty much full coverage to ensure the dashboard is a success.”
Bringing pensions into the 21st Century
It’s undeniable that technology is integral to the success of dashboards. In an era where people can do their banking from their mobile phones in an instant, pensions are lagging behind. Rob Yuille, manager, retirement policy at the Association of British Insurers, highlights that there have been a number of unsuccessful ideas to combine pensions data for members in the past – combined pensions statements and ‘pot follows member’ to name a few.
It is essential that the pensions people start to understand the technology
However, he is determined to make dashboards a success, and believes that we now have the technology to make this happen. He says: “It is essential that the pensions people start to understand the technology, and that the technology people start to understand the pensions.”
Philp points out that the technology already exists. He explains: “A quick look at an app store shows that these tools are increasingly common, and some employers and providers already offer a similar service. “There are also systems in place to help facilitate transfers electronically. API technology and the progress we’ve made with payroll integration demonstrate that this can be done.”
Barriers to beginning
Snowdon is on board with, but cautious about, the ambitious implementation schedule. She says: “It is fairly realistic, but I don’t see it being all things to all men by 2019. It will be a very good base by then, though.”
We still need to learn from the prototype to make sure that the technology works
To those who say dashboards could be set up as early as next year, Snowdon warns: “I don’t think that will deliver the dashboard that we want, because we still need to learn from the prototype that’s being built now to make sure that the technology works.”
Philp is more optimistic. He says: “This isn’t hard. The technology is available, it’s just a case of developing the infrastructure and defining the governance framework. We expect to have a prototype up and running by next April, and once that is in place I think things will move at a pace.”
Agreeing a vision and purpose for the dashboard is paramount. Done well, it has the chance to revolutionise pensions, taking cost out of the system and improving the customer experience. Done badly, it could damage consumer confidence and even facilitate scams.
Members don’t trust pension providers, but the dashboard could overcome that
This is something that Snowdon feels passionately about. She says: “Members don’t trust pension providers, so there is that basic lack of trust to contend with, but the dashboard could overcome that. There is an air of mystery over pensions in the UK and dashboards will help with transparency.”
Philp adds: “We always need to keep at the forefront of our minds that this is member data and that it’s the members who should ultimately have control.”
This could be a huge opportunity to reset the dial when it comes to good quality data
So what next? For now it comes back to data. Older schemes should be working on the capability to send their data in a standard way, and make sure all information can be shared digitally. This could be a huge opportunity to reset the dial when it comes to good quality data, and it already has backing from PASA, which is about to launch a working group focused on creating ‘dashboard-ready data’.
So let’s get ready to bring pensions into the 21st century.