The devil’s in the dashboard

pensions

Everyone agrees a pensions dashboard is a great idea. But what it should look like and how it should be built are where the arguments start. John Lappin investigates

Despite our increasingly digital age, significant barriers remain to delivery of a pensions dashboard by the Government’s target of 2019.

Many believe the Government needs to act in more than its current planned role of convening and cajoling and the absence of any mention of the dashboard in the Queen’s Speech has created disappointment in some quarters.

A pensions dashboard was one of the 28 recommendations of the Financial Advice Market Review, picking up the baton from the FCA’s Retirement Income Market study, which recommended building such a tool on the back of the pensions passport, and which also recommended it should include state pension information.

Now the ABI has said it plans to take forward the idea, announcing a plan to build a prototype, taking forward work done by the MAS-led Pension Finder Working Group.

The ABI says the next phase of the pensions dashboard project should include finalising the governance framework between industry, Government and regulators, developing a prototype to test the technology and collaborating with the wider industry and interested FinTech start-ups.

Labour has made it clear it believes the state pension should be included, arguing that planning would be meaningless without it. Yet the Government has remained silent on the issue to date.

FAMR recommendation 16 says: “The Treasury should challenge the industry to make a pensions dashboard available to consumers by 2019, bringing together industry and consumer representatives to help them set direc­tion and drive progress.

“HMT should co-ordinate the Government’s involvement, to ensure it provides appropriate legislative and administrative support as the project develops.”

Working together
Those worried that this indicates limited government involvement were not reassured by recent comments from The Pensions Regulator chair Mark Boyle, who told a conference: “It’s not within TPR’s gift to do it alone. We need to work together, public and private sector.”

Such comments may be open to interpretation until we see the actual plans. But Steve Webb, the former pensions minister and director of policy for Royal London, has concerns. The provider has just issued a report on the pensions dashboards of Australia, the Netherlands and Sweden.

“One of the lessons from all these countries is that, without active government intervention, these things take forever,” says Webb. “The Swedes have a great dashboard but they told us that, because they tried to do it all by consensus and endless discussion, it took over a decade.

The Australians, on the other hand, said: ‘Guys, you have 20 months.’

“The Australians and the Dutch have legislation that says one of the things you have to do if you run a pension scheme is provide data in a set format to the dashboard.”

Webb is worried by the Government’s and TPR’s emphasis on the voluntary. “If you were a DB pension scheme, why would you be interested if suddenly you were getting all these requests for data? Why would a trustee want to spend money on this unless they had to?

“The first thing we need is a legal framework and duties on schemes to provide data. This Pensions Bill should have provided, and could still provide, a slot. They could put in a clause saying the secretary of state may issue a regulation requiring schemes to provide specified data in a specified format.”

Webb warns there is no guarantee of a 2017 Pensions Bill, so missing this year’s bill could cause a long delay.

“Everybody accepts you are going to have a sequential approach. You won’t have a ‘Go live’ day with everything on it. However, a dashboard without a state pension would be a joke and, given that they have digitised the state pension information pretty extensively, I don’t think it ought to be a problem.

“Then you start with your auto-enrolment DC; that should be the cleanest data. Then you talk to the big public-sector schemes with DB entitlement and build from there. The legacy stuff will take time.”

Jelf head of benefits strategy Steve Herbert says: “This is the more practical solution to transfers. Why do you need to move the money if you can report it all in one place?

“I think it is good news. It will be more pragmatic for employers and safer. I can’t see a problem apart from the fact the industry will have to deliver on it.”

Starting somewhere
Pension consultant Rachel Vahey says: “There are some who argue that until we solve the problem of showing all pension schemes we should lay off the idea of a dashboard. But I disagree.

“To have only some schemes feeding in is, of course, far from perfect, and it risks people being turned off or becoming disillusioned. But we have to start somewhere. And even having most schemes on it with the state information as well could be powerful. It would place most people in a far superior position than they are in today. And that’s progress.

“We need to aim for a position where most schemes feed in. That may mean a legislative nudge and most worldwide examples of successful dashboards have had government backing. The UK Government should be taking a lead on this, rather than sitting on its hands. It should own this; there should be only one dashboard. And it’s essential it includes state benefits as this is the basic building block of retirement income.”

Standard Life head of pension strategy Jamie Jenkins says: “In an increasingly digital age, it seems inconceivable that people wouldn’t be able to trace and view all their pensions in one place. The questions are simply when and how, rather than if.

“It may take time to get all providers and schemes on board but the drive from government will help. Most likely, the major providers will lead the field and others will follow in time, with 2019 now being a very visible target.

“Ideally, there will be one common set of standards so that providers can supply data in a consistent manner and through secure and tested protocols. That said, there can and should be competition from those providing the customer dashboard itself. Over time, such competition will drive improvements to the customer experience and command development of further functionality, such as the ability to consolidate pension funds or switch investments.”

Scottish Widows head of industry development Peter Glancy supports a single, central home for the dashboard, which he would like to see provided by the guidance service currently being formed by the integration of the MAS, TPAS and Pension Wise.

He argues this is better than what he calls a ‘many to many’ system, with lots of small schemes providing information to dozens of dashboard operators, preferring a ‘many to one’ data transfer system. He says increasing functionality could be built in to the system, including projections, possibly charges and eventually the ability to switch. He also thinks this resolves funding issues because the guidance is provided by an industry levy.

Unlike others, Glancy thinks smaller, older schemes should be required to provide data. He adds: “For most people coming up to retirement, the majority of money, nearly 80 per cent, will be in occupational schemes. If they are not compelled to take part, it could be absolutely useless for the next 10 years. They say their data is in shoe boxes. Modern software suppliers could take data out and digitise it. It is critical we don’t let the old schemes off the hook.”

Now: Pensions director of policy Adrian Boulding is concerned about cost, especially in terms of the pension-finder part of the project that the ABI, MAS and Origo are working on. But he does not back compulsion at this stage, arguing what is needed first is ‘a coalition of the willing’.

“Compulsion needs to come later down the road,” he says. “Until we have produced a dashboard and shown that customers use it and that it changes behaviour and brings better outcomes, we don’t have a business case. When we have the case, then we can introduce compulsion. Then we can say it is in the best interests of the customer.”

Aggregation
David Bird, head of proposition development for LifeSight, Willis Towers Watson’s DC master trust, says: “There are difficulties aggregating different forms of pension with different rules. We lack a unique identifier. Sadly, the NI number doesn’t quite work for this because of temporary numbers. You always get a small percentage not covered.”

Bird believes the dashboard fits best into employer communications. He says: “Aggregation should move around as you move around so you can go and look at it in the place you are most likely to look at your pension – that is, where you are currently working.”

Welcoming the idea of a dashboard, Master Adviser partner Roy McLoughlin says: “The most moaned-about thing I get is people saying ‘I have pensions all over the place. I don’t know what to do.’ That has put me off talking about pensions. We need an algorithm that adds them up. One of the reasons auto-enrolment is working is its portability.”

He adds that any dashboard needs to project and of course take inflation into account but it would be a huge help in both face-to-face sessions and employee group presentations. He says part of what advisers are doing is effectively helping the client to create a dashboard for themselves. This means convincing clients to find out about old pensions and also plugging in to state pension data.

He says the biggest sum a client found out about when they were not even sure they had a pension was £111,000. But apart from delivering good news, an aggregated view also helps clients understand how far away they are from reaching their goals.

Software provider CTC managing director Nigel Chambers is impatient. He says: “Everyone knows its value. I don’t understand why it need take so long. We have good ideas about governance. We need to get a model that is trusted by everyone. Get it off the ground rather than waiting for the last person.

“We need a lead from the big insurers because they are the potential gainers from it. They like the idea of aggregator assets and, hopefully, will be willing to fund it.

“The problem is the DB and occupational DC, which is a cottage industry that doesn’t understand standardisation, whereas Origo does it for insurers. Leave the placeholders in the dashboard, where information may be missing initially, so that people know which information they need to get.”

The case for a pensions dashboard is hard to refute but debates over the best route to the destin­ation may slow the journey.

Driving change through dashboards

Royal London has just published a paper on the genesis of pensions dashboards globally

Australia
The driver for the Australian dashboard has been the compulsory superannuation system, part of the impetus being to link people with lost accounts. People generally have three supers and there were 5 million pots on the lost-pension register. Tax file numbers were used as a common identifier. The system was rolled out to the bigger funds first. There is still a debate about creating a formal system to consolidate funds.

Netherlands
A dashboard has been available on a government-owned website since 2011, with pension schemes required by law to provide data. It includes state and occupational pension information but not ‘personal pensions’, although there are plans to include them. Current­ly updated annually, there are plans to move to monthly updates. More functionality is in the offing to allow the public to estimate their retirement income. It will also be extended to retirees at some point.

Sweden
The Swedish system was set up in 1999, with the population receiving an annual statement of state pension rights in an orange envelope, including a projection of future rights. From this year, the envelope will contain a personal code. Online projections include premium pensions (which cover 90 per cent of paid work in Sweden) and individual pensions, but the process has taken over a decade to set up – albeit it now covers 99 per cent of schemes including defined benefit pensions.