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!