Jo Cumbo asks how the Pension Freedoms are bedding down. I don’t have access to the big data of an insurer but I am 54 and am now only six months from my entitlement to blow my savings on whatever I like.
Like I would like to donate to the Treasury benevolent fund! I’ll be scoring low on the freedoms “muppetometre”.
A couple of years ago I aggregated all my small pots (other than the ones with exit charges on them) into one big fat pot. I also took out a subscription to MoneyHub which for a few pence a week allows me to see
- All my money in one place
- All my debt in one place
- How I could pay off my debt with my money
- What the tax implications of doing something or doing nothing would be
- How my investments are performing
- How I’m doing managing my day to day finances
It’s called a dashboard, it sits on my phone and it works.
A common digital password
It doesn’t work for everything and the people at Moneyhub, a seriously well-funded star-up in Bristol tell me that their biggest problem is getting to the data that I want to see.
Ironically, the data security impediments have been set up to protect me from data theft or worse, the theft of my money. I guess I shouldn’t be moaning that I can’t see everything without some password stuff, but I do.
If I was in Estonia, the Government would provide me with a Government password and User ID which would give me access to everything- including my state pension forecast and all those hard to access numbers that even Moneyhub can’t reach.
That’s because Estonia is a young pup of a digital economy that started from scratch with data security and built a common data protection protocol. There are some really brilliant people in the UK working in the Cabinet Office on trying to replicate Estonia in Britain, they tell me we are some way off being able to do an Estonia here- we’re too digitally mature.
Pot follows member – three schools of thought
When the Government put out a consultation on pot follows member, there were two sets of answers, the first said that everything should go into super trusts (this was the centrist philosophy of what was then the NAPF). The other view was that individuals could aggregate their money around their favourite private pension using similar technologies to ISA aggregation (this was the view of TISA, Altus and the retail funds industry). Both of these positions assumed it was in people’s industry to physically combine pots either through sale of assets or through re-registration.
Ros Altmann put a stop to all that last summer when she called time on the pot-follows-member project.
There was a third view, one which First Actuarial and the Pension PlayPen argued for, which was to create a pension dashboard which people could use which
- engaged them in the issues of personal pension management
- educated them in how their different pots worked
- empowered them to take the right actions at the right time.
“Engage” and “Educate” come before “Empowerment”
We cannot take action on big financial matters without being engaged and educated. If we can’t get educated to take decisions, we should let others take decisions for us, that’s why we have defaults.
The idea that we should take action by transferring our pots into one big fat pot is fine for someone like me- I am engaged and educated and I knew what I was doing. My frustration was with the insurers who wouldn’t let me have my money until I could prove I was qualified with a whole lot of mumbo-jumbo financial advisory qualifications!
But most people aren’t like me, and as the FAMR has discovered, most people neither want to pay for, or able to find, the financial advisers to engage and educate them. They remain in darkness.
When it comes to spending our pension pot(s) most of us will act in the dark. Pension Wise – or whatever its successor looks like, will give us guidance but they will not empower us to act for ourselves, how can we learn so much in such a short interview.
The Government’s big new bet is on providing the engagement and education through a generally available pension dashboard that engages people with their money and educates them on their choices. Hopefully such a dashboard will signpost next steps so people feel empowered to spend their money.
The big new idea is that this pension dashboard will be up and running (and hopefully on whatever our phone has developed to) by 2019.
Will the pension dashboard happen?
This is a really big question. If this is going to happen it will be because Government really want it to, Government has the right people and there is sufficient motivation in the private sector, for it to pull its collective finger out.
I spoke with Michael Johnson about this (and he usually knows). He told me last Friday that the Pension Dashboard is high on the Treasury’s priority list. I have met bright people in Government who get digital aggregation, people like Trish Quinn and Sarah Walton in the Cabinet Office and Sally Meecham and Mayank Prakash at the DWP. I am quite sure that the skill and vision to get this underway rests within Government.
But I am less sure about the private sector. What is the motivation for all the disparate voices in the pension industry to sing from one hymn sheet on this? What brings those who control data in large occupational schemes, the plethora of workplace pensions, the SIPPS and the legacy of the insurers – to work together.
Here is the comment of one enlightened IGC chair writing to me yesterday
The whole digital delivery stuff is very frustrating. It’s not an xyz issue but I think a broader one.No one seems to be grasping the need.I want members to have real time info on their phones, an app which allows people who find they have a bit of money to spare at the end of the month to be able to press a button and invest that in their pension ( or LISA) and potentially to do asset switching ( I’m less concerned about this as I think
It ought to be a considered decision (not spur of the moment) but I simply cannot get people excited about the possibility and occasionally run into downright hostility!