I find it hard to think of any area of this industry that will benefit more from the successful delivery of the Pension Finder prototypes as part of the pension dashboards project than workplace pensions.
Since the commencement of auto enrolment in 2012 over 7 million consumers have saved for their retirement for the first time. Given that mobility of employment is a key characteristic of the current work practices it is a matter of when not if they change employer and hence auto enrolment scheme.
If we are to keep these new savers engaged with the benefits of their pension contributions we need to find easy ways to show them how their pots are growing. This is more important than ever as we approach the first increases to auto enrolment contributions from April 2018. If members are not fully convinced of the benefits of these increased contributions, opt out levels may inevitably escalate.
As I have said many times before in this column, I believe the workplace is the ideal market through which to deploy automated advice services. The delivery of dashboard services will enable significant economies in such processes, by making a ready stream of accurate and reliable information available online. Dashboard services and automated advice are highly complementary. They are key components in increasing the availability and reducing the cost of financial advice.
It is no surprise to me that both Aon and Willis Towers Watson have been actively engaging as members of the prototype project. Their peers would be well advised to increase their participation. Having proved that pension finder services can work, as an industry we now need to look at how the information they can deliver can substantially enhance the benefits portals and other services that are a natural bolt on to workplace pensions.
The success of the Pension Finder element of the pension dashboard project should be a warning to corporate advice firms who are not making significant investment in their ongoing technology platforms and the data they deliver to their clients and their employees. In recent months I have seen some stark contrasts in the different levels of technology which corporate advisers are deploying. Some firms seem satisfied to supply what are little more than brochureware sites with very limited personalisation.
Conversely those at the leading edge are providing a highly personalised experience with a wide range of information about the member’s individual arrangements being put together from multiple sources. Pension dashboards will make this easier but there is no need for firms to delay making progress in this area until the full dashboard service comes along in 2019. Now is the time to be getting your benefits portal “dashboard ready”.
Another valuable lesson learned during the finder prototype phase, is that it will be will be far easier for defined benefit schemes to be included in dashboard services than some in the DB community, perhaps with vested interests, are currently suggesting. Both Aquila Heywood and ITM Systems who support many, many millions of defined benefit members pensions have been an integral part of the Pension Finder prototypes and talking to their directors at a recent demonstration they were clear that, contrary to suggestions from some defined benefit trade bodies, there are economic routes for large and small schemes to embrace pension dashboards as a way of delivering far better information to their customers.
One thing I have learnt from my involvement in the pension dashboard prototype is that members of DB schemes, especially those who have left the employment of the original employer are very much the poor relation when it comes to the level of information provided to them. There appears to be a strong case for defined benefit schemes building and maintaining better data and whilst the pension dashboards project may be a catalyst to this, the real driver should be such schemes implementing better practices than they do currently.
Advisers wanting to be well-positioned to offer automated advice at low-cost to members leveraging pension dashboard services firms, should be finding their digital advice technology partners now if they don’t want to be left behind by their competition. At the same time when considering such technology partners it’s crucial to understand their pension dashboard strategy.