Posted in: Wealth Management Administration
The financial services sector must not waste the chance to deliver on the promise of the pension dashboard, writes David Simpson, as he urges businesses to have their say while the DWP consultation remains open.
After lengthy delays, the Department for Work & Pensions (DWP) finally revealed its plans for multiple pension dashboards in a consultation launched last month. While the initiative to provide a single view of all pensions and their projected income is to be welcomed, the government’s feasibility report raises a number of issues and contradictions that ought to be addressed in the final delivery strategy.
The DWP has decided to create a non-profit dashboard first, led by the new Single Financial Guidance Body (SFGB), followed by other provider-sponsored commercial models. Given the priority for most people will be just to see their pensions in one place, launching the single view first and adding opportunities to transfer provider or consolidate schemes later seems sensible.
Consumer research cited in the DWP consultation document, however, revealed a preference for one dashboard, observing: “Users tended to prefer a single dashboard with a single point of access – this was simplest to understand from a user perspective.” The decision to create multiple dashboards therefore seems to ignore consumer demand and care will need to be taken to avoid confusion.
With multiple dashboards also comes the added complexity of authenticating and authorising the individual to access their pensions data across multiple providers as well as the issues of ensuring the consistency of that data.
Like-for-like comparisons on platform and investment charges and illustrations and projections of future income will be important across all dashboards – though particularly within the commercial models, where the ability to transfer or consolidate pensions will create, directly or indirectly, a transactional element. The dashboard’s purpose is to help people with their pension choices and offering multiple dashboard seems to complicate this intention.
In addition, assuming the data can be made consistent, it is unlikely to be complete – at least initially. Although legislation is expected to compel most schemes to supply data, certain types of pension – for instance defined benefit schemes – are likely to have a longer transition period than others, with full coverage anticipated to take as long as four years.
There have been calls for the exclusion of specialist pensions schemes, such as executive pension plans and small self-administered schemes, but it seems difficult to justify carving out the latter, for example, but not bespoke ‘full’ self-invested personal pensions, which are also director controlled.
Given the launch of the non-profit dashboard is set for later this year, it will not include all schemes from day one and, although there will be a link to obtain state pension details, this will not be delivered as a single view alongside other pension plans initially.
This may be a disappointment for many individuals expecting to find – as billed – a single view of all their pension data. Launching with incomplete data may erode trust in the SFGB’s non-profit dashboard, driving people towards the commercial providers’ offerings, which may be more complete as they are delivered later.
The DWP handing leadership of the initiative to the SFGB also seems a risky move. Launched this month, with responsibility for providing debt advice and money guidance alongside pensions guidance, the SFGB has no track record in leading complex industry technology projects and the challenge of bringing the dashboard to fruition should not be underestimated.
Given the SFGB will already have its work cut out in integrating the previously separate Money Advice Service, Pensions Advisory Service and PensionWise, immediately adding responsibility for the dashboard seems an unnecessary extra burden.
Providers may also benefit from the proposed access arrangements for third parties such as advisers. The DWP consultation paper suggests “the individual should have the ability to manage consents given to dashboard operators to access the data and be able to revoke those consents. Delegated consents should be time-sensitive and should be revocable by the user without the co-operation of the third party”. Although putting power over their own in the hands of the individual is to be encouraged, this feels unnecessarily clunky and could lead to unintentionally orphaned clients.
Finally, the consultation paper makes much of the success of Open Banking, which the DWP hopes the pension dashboard will emulate, yet it is foolish to compare the projects given the huge difference in scope, scale and complexity.
Nine banks were legislated to provide Open Banking, versus 40,000 pension schemes managed by 4,500 administrations and thousands of employees. By all means let’s learn from the successes of other financial sector projects but, at the same time, we should not underestimate the complexity of the task in hand.
The changing shape of UK pensions saving, driven by the demise of the job for life, the rise of auto-enrolment, the shift from defined benefit to defined contribution and an increased emphasis on self-reliance rather than state support in retirement all point to the need for the pension dashboard.
That said, we must not waste the chance to deliver on the dashboard’s promises – the DWP consultation is open until 28 January, so let’s all have our say and make sure we don’t make a hash of the dashboard.