The stock market keeps going up, our DC pensions keep going up, every morning I have a peek at my private pension dashboard with L&G and go whoop! There may never be such a time as this morning to enthuse about “engagement”!
This morning I’m meeting with a policy chap about the new breed of pension dashboards which we’ll be able to use from 2019 which will allow us to look at all of our pensions in one place , I dribble with anticipation.
If you detect a degree of cynicism in my tone, you are an expert reader! You are right! Stock-markets won’t always be touching record highs and when we get to 2019 we will still have precious more to do with all this money we’ve saved than we do now. There is no clear and definitive course of action for the clueless and until we build some form of collective decumulator which manages risks and costs and provides a pooled solution to longevity, we will be stuck with the current triage – “blow it, draw it down or give it to an insurer in exchange for a lifetime income”.
Blowing it means a big tax bill and a lifetime of poverty, drawdown means big advisory bills and uncertainty of outcomes and the annuity- well we all know that “nobody need ever buy an annuity again” – a ringing endorsement if ever there was one!
Dashboards and the workplace
I’ve noticed in Government projects like the Pensions Dashboard have generally succeeded because employers or their agents have adopted them. The three most recent examples are making tax digital, real time information and pensions auto-enrolment.
The supply chain has been simple, Government driving change, software companies delivering the means and employers and their business advisers adopting.
It will, I predict, be the same with the dashboard. Payroll software companies are already alert to the gap between what people want by way of pension information and what they are getting.
Organisations like Sage are already gearing up to do this and the dashboard will help. What’s more important, if the dashboard can be embedded into the BAU processes of HR and payroll then they will have fulfilled a key purpose, of engaging employers and employees with pensions as more than a matter of compliance.
A big if…
The two dependencies standing between the vision of pension dashboards and the reality are
- That they get used
- That they lead people to good outcomes
We may think that consolidation (aggregation) of small pots into a big pot is a third , but I really don’t see much to be gained from having one big pot unless that big pot does the business.
Dashboards need to be part of employer BAU as a springboard to individual engagement. But to have useful purpose , they must signpost clear next steps – a definitive course of action as simple as the annuity – but a lot more effective.
The alternative is that the Government accept that they are simply making the lives of wealth managers a lot easier.
In truth, all that Government is doing currently is establishing data standards for the wealth managers to use to pool our disparate pots.
To move toward a coherent workplace solution that helps people spend their savings as easily as build them, they need to pay attention to those not currently targeted by wealth managers. These people will not want wealth management at all, they will want a wage in retirement – from the state – and from their pension savings.
It is now up to the Government to turn its thinking to this much more ambitious project!
Some facts from the real world, outside of the financial services bubble:
– people have not asked for a dashboard; the only people that will use it are people who have a great spreadsheet already, so building a dashboard where you can “ask Siri” – “How much are my pensions worth” is not helping the people who need help;
– looking for a contract based pension currently, especially a contracted out personal pension plan sold to you in the 1990s is a nightmare so having a dashboard that helps with this will put people in a better position than they are in today;
– people have cashed in small DC pots as part of pension freedoms as they have not seen it as part of a bigger picture – cashing in a DC pot where you have just received a statement saying it is worth £4k is done with no thought whereas if the £4k pot is listed with other pots that total £50k, say, the customer will give it more thought;
– the dashboard will raise questions rather than give answers so needs support/impartial guidance to help people understand what appears (or does not appear) on the dasboard;
– commercial firms building a dashboard will be looking for a ROI so there must be one unfettered public service dashboard available (as in Australia);
– the dashboard is a tool that will help people but it is not the solution to getting people to make proper provision for their retirement.
Henry, I completely agree with you that to be a success pension dashboards will need widespread usage and to clearly signpost next steps for the user. Seeing your data isn’t going to get you very far if you don’t know what to do once you’ve looked at it!
This is why the NEDs at Pension Quality Mark (who all work unpaid) have been so keen to get a Retirement Quality Mark up and running. It’s going to be a list of independently accredited retirement income schemes aimed at the mass market, the sort of person emerging from a workplace pension who probably doesn’t enjoy the luxury of a financial adviser.
We have the first three drawdown schemes in place, and expect to add others shortly as well as building out the Retirement Quality Mark to include secure lifetime income. Drawdown without advice charges !
And the regulator has confirmed that it’s OK for scheme managers and trustees to signpost members to the list at retirement without transgressing into regulated territory
Adrian
Adrian – unadvised drawdown sounds a bit like exploring a minefield with a tin hat! I’m glad that RQM is up to something but will this get the same attention as the PLSA’s abortive workplace pension ratings? You can of course draw-down without advice charging from most workplace pensions – you just have to be a pensions expert with a bomb disposal diploma!
Michelle, your post interested me. I spent some time today talking to pension consolidators who are doing the £4k x 10 thing and getting people keen on what they had. The money goes into one of the new breed of SIPPs (Adrian’s probably analysing them) that give you a means to spend your money without advice, but if we are talking Australia – isn’t this exactly what Cooper was worried about?
I agree with Michelle we dont need a bank statement to describe the water your drowning in – consumers want help when they need it.