Can consolidating all pensions data on to one platform work? Helen Swire asks if a pensions dashboard can occur any time soon, and if it will genuinely help employees
The whirlwind of changes in the pensions industry since the introduction of auto-enrolment in 2012 has left everyone unsettled – not to mention the chain of pensions ministers responsible for the decision making.
In 2015, then-minister Steve Webb expressed a hope that a pensions dashboard, drawing together every member’s retirement savings into one place, might be implemented “within two years”. However, his successor Baroness Ros Altmann said that implementation would be “a decade or more away”.
Now, Richard Harrington, parliamentary undersecretary of state at the Department for Work & Pensions, suggests a dashboard could be in place by 2019.
With so many mixed messages around an uncertain proposition, it is time to ask how the proposed dashboard would work, when it may actually arise – and what the tangible benefits to the workforce will be.
The concept behind the dashboard is relatively simple: providing a ‘one-stop-shop’ for people’s retirement savings, giving them control of their own information and data, and making all savings information readily available tothem in one place, regardless of provider.
Steve Webb, now director of policy at Royal London, believes that in the next few years the government should work on “drawing together the state pension, as many defined contribution schemes as possible, and big public sector schemes – not least to see how it will work, and work through the issues.”
According to Webb, if using schemes with easily manipulated, new data, this should not be an insurmountable task for the near future, and indeed the pensions industry have already agreed to work on building a prototype dashboard with the government to see how it would work in practice.
“Efficiently and accurately matching customers to their pensions will be challenging and will be a key focus of the project,” says Jamie Jenkins, head of pensions strategy at Standard Life.
He adds: “DWP predictions are that those currently entering the employment market will change jobs 11 times, risking having 11 different pension arrangements.
“Without a dashboard, there is a significant risk that employees lose touch with at least some of their pension plans.”
Standard Life have outlined how the dashboard should work, saying it should be accessible via several routes (e.g. benefits systems, providers, robo advisers), and should allow people to view both the value of the pension arrangements and also their projected retirement income.
With several providers and industry bodies experimenting with dashboard-like technology, it is clear that some of the data is already accessible – and it could even go further than retirement savings.
Jenkins says: “There’s the potential to provide added-value services on top of this, such as modelling future income requirements, helping employees access financial advice, and offering potential solutions to help them save to plug gaps in retirement income.”
“Our system is very fragmented,” warns Webb. “There will be something in place soon – but how long it will take to be comprehensive is anyone’s guess.”
However, the industry view is that some form of dashboard will be implemented in the next few years.
“There is a real impetus behind the dashboard now, and a lot of industry goodwill to make it happen,” says Darren Philp, director of policy at The People’s Pension. “It might not cover all pensions straight away. But with the will, there is no reason why we can’t have a really good and comprehensive dashboard up and running in the early years of the next decade.”
The challenge to getting all the data in place and running smoothly comes with getting all systems to work together efficiently – which is getting easier with technological progress, but is also hampered by the number of different pots members have, and who holds the data for each.
For example, different members in the same company may well be in different plans, before you even scratch the surface of who has defined benefit pensions as well as defined contribution ones.
Debbie Falvey, DC proposition leader at Aon Employee Benefits, says: “If you’ve worked in more than one place, you’ll want to know what different plans you’re in… if you want to model what options you take at retirement, you need to be able to see all of your plans. The government will have to solve the complexities around the best way of joining it all up.”
The benefits of buy-in
There is no legal duty on providers to take part: this is the first key barrier to success, as without full provider interaction the dashboard can never be comprehensive.
So why should employers get on board? What level of buy-in will it require?
Falvey says: “All employers have to make minimum contributions into people’s pensions through the government’s auto-enrolment policy, so why not make the most of an employee system for planning and making the most of retirement savings?”
In providing information, the dashboard could even cut employer costs around education and advice. And it is, after all, the employee – the saver – who is supposed to be the raison d’être of the dashboard.
A single place that draws all their pensions savings together can only be helpful, and equally, could act as an engagement tool for connecting people with their savings, helping them to understand contributions, allowances, retirement options and so on.
“People who have access to these tools and capabilities are generally more engaged and supported in making their choices,” says Falvey. However, she warns that a dashboard will not replace the need to talk and have face-to-face discussions.
Brian Smyth, head of benefit solutions at Ascot Lloyd, believes that without appropriate education around pensions, a dashboard might simply add complexity to the decisions people have to make.
“The main thing employees need is to understand exactly how pensions work,” he says. “There’s a basic misunderstanding and lack of education that we have to solve first – adding all your savings together in one matrix is the final step.”
For Smyth, the dashboard should be more about “making sure individuals understand life expectancy and how pensions work in the round”. Nothing can replace clear communications from the employer about what their funds are, what their pension means in terms of retirement income and the importance of retaining and reviewing this information.
Once the education is in place, drawing the information together in one place can come next. And if employers are also able to draw other benefits on to the dashboard, is there space for it to go further?
With the emergence of the LISA (Lifetime ISA) the workplace pensions conversation has rather become one about workplace savings. So could a dashboard interest younger savers?
“There is a value there, but the dashboard really needs to be there for people coming up to retirement age,” says Smyth. “But we should also ensure that all individuals know how the system works and make them empowered to plan ahead.”
The People’s Pension’s Philip, agrees that however effective the dashboard will be, it is not the last word in financial education.
He says: “The dashboard creates the basic infrastructure for giving people up-to-date and accurate information, but people want help with their pensions and, as an industry, we haven’t always been good enough at providing that help.
“How people are supported in making decisions using that dashboard information will be crucial.”