From here last March
to here today
Like a fool I thought that a DWP seminar on the Pension Dashboard would be held at the DWP, it was held at the ABI. I had to double back on my Boris Bike. which meant I missed the Pension Minister’s words . Cycling on London’s new super high-way linking the DWP and ABI at least gave me time to re-cap.
Those were the days!
The Pension Dashboard was launched in Aviva’s Digital Garage in Hoxton Square by Simon Kirby .
Simon is no longer in politics (let alone the Treasury) and his mate Richard Harrington is no longer in pensions. The Treasury have handed over to the DWP where former Treasury star, Charlotte Clark has taken up the baton. Guy Opperman has told us the Pension Dashboard will happen. I went to One America Square to find out what.
I found that somewhere in the intervening 6 months, there has been considerable Governmental scope creep and this concerns me.
The Digital Garage has been replaced by One America Square, Fintech by the ABI and the buzz-words are now “compulsion” and “standardisation”.
What’s changed?
Two things have changed
- This is now about Government delivering , not about Government facilitating
- We are now assuming that pension operators will have to participate.
The world according to Kirby was a place where entrepreneurial zeal as displayed by firms like MoneyHub and Pensions Bee and Evestor, were held back only by the lack of data standards. Given a common set of protocols, devised by Government and curated to the Fintech cognoscenti , the Hoxton square mob would make the dashboard happen.
Just look at how revolutionary things like mobile banking and comparison sites have already been.
It’s time for pensions to catch up. (Simon Kirby March 2017)
The world according to the DWP is one where innovation is a dirty word and where the entrepreneur is regarded with suspicion.
The not so brave new world
Whatever happened to the data standards, they weren’t on display at the ABI. Instead we learned that the Government was not only going to facilitate but legislate. New laws were on their way that would require pension operators to make data available on request. Government would now operate the data hub through which all data would pass. Innovators would have to plug into the hub to play.
The key words were simplicity and consistency. The vision was one of people comparing their combined pension forecasts (remember them?) with each other – presumably after a good session on the printer. Far from catching up, the pension sector looks consigned to standing in a queue outside the DWP waiting for further instructions.
I have not seen the DWP in such interventionist mode since the days of Gordon Brown where the vision was of NEST managing the auto-enrolment process. There are many who still cherish that vision, I am not among them.
NEST have continued to go their own way. They did not co-operate when payroll needed a common data standard and effectively killed PAPDIS at birth, they are now the outlier, the only major workplace pension operator not using Origo. NEST has consistently refused to co-operate with private pension providers on matters of data management.
NEST demonstrates the not so brave new world of the DWP and much as I like and admire Charlotte Clark, I see her vision and NEST’s vision as compelling everyone to dance to their tune.
Compulsion
The auto-enrolment project compelled employers to participate. Employers have also been compelled to adopt RTI and are now struggling with GDPR. We have compulsion coming out of ears.
The cost of digitally transforming legacy systems or adopting manual data export processes will be very high. It will eat into whatever budget operators have for innovation. There are many areas competing for that money, not least the need for proper payment systems so people can spend their pension pots with the freedom they have been promised.
But worst of all, compulsion on a pension system that is, as Kirby pointed out, well behind the Fintech curve , will not drive innovation or competition or better outcomes. It will create another big Government data cock-up , the likes of which litter the digital landscape.
What can the DWP do?
I would urge the DWP to reconsider its expansionist agenda and start talking again – not to old lags like me (there were many in the room) but to the young people who are energised to deliver real change that is relevant to a generation yet to have serious pension wealth.
Leave the baby boomers out of this – give the dashboard to the kids
Forget my generation, we can get by on the BR19 and from forensic research using the tools at our disposal. We can turn to MoneyHub and PensionBee and Evestor if we need help in aggregating data and we know that these guys are about managing our money.
Divorcing the delivery of the dashboard from the entrepreneurs is retrograde. Let them drive technology forwards and leave our generation to innovate another way. I will be spending two days this week looking at CDC.
Being sold robo-aggregation is the least of anyone’s problems.I have no difficulty telling a robo-adviser to f*ck off, I do it every day. Robots are remarkably resilient.
Those who worry that the innovators are just trying to sell them something, have forgotten that most of us need to buy something – a properly organised retirement plan. I have absolutely no difficulty with Fintech’s driving that forward.
Take back this project from the ABI
The DWP should get back to being the DWP and leave the ABI out of it. They should have their own budget for this important project and should not be having meetings in the offices of one of the vested interests.
Frankly, if the DWP cannot host their own research, then Guy Opperman’s claim that the “Dashboard will Happen”, sounds an empty threat.
Focus on the future not the past
The pension dashboard is in danger of delivering a “super-simpi”, a souped up statutory money purchase illustration.
The value of the Dashboard is not in making the past better but in satisfying the needs of a coming generation. Frankly it’s the generation who were not represented in the room i was in yesterday lunchtime.
If you want a dashboard that is relevant to people under 35, put people under 35 in charge of delivering it.
Talking among ourselves.
The DWP had a little innovation in the room in the form of a foam ball housing a radio mike which was supposed to be chucked around the room by energetic dashboardees.
It didn’t work. An elderly matron professed she’d never been much good at netball and the ball was politely passed from table to table.
It seemed a good metaphor for what was happening with the dashboard itself.
The best comment from the session I went o (they ran three yesterday so I think I was in a different one from Henry) was that we have a currency problem, in that DB talks in terms of income while DC talks in terms of pot size. Most people coming to retirement have some of each (remember state pension is DB) which makes adding the two together difficult
Talking in terms of pot size for DC is an industry invention, it fits with our mechanics of units and unit prices. But it’s unhelpful to members whose need is to talk about retirement income
We’ve also seen recently that it’s unhelpful for DB to talk pot sizes (aka transfer values) as this can lead members (aka steel workers) into panicky bad decisions
So the suggestion yesterday was that the dashboard should make its primary focus to show the DC pots as a projected retirement income, and relegate pot size down into the small print
Call that a “souped up smpi” if you wish, but if it helps people with multiple pensions of different forms to see whether they are on track for a retirement income that will support their anticipated pensioner lifestyle then I think we would be taking a large step forward.
Whilst the fintechies seemed largely absent from the session I attended (and I guess from the one Henry attended) they seemed to have been replaced by people who knew how to communicate successfully with ordinary pension scheme members who currently struggle with pensions complification. I did sense a real desire for the dashboard output to be very simple, and in doing so, to put ordinary members back in control of their own pension destiny.
Whilst simpler communication is a worthy aim Adrian, it misses the fundamental problem.
That is that people want/need an income but DC is a pot of money. Trying to work out what to assume to convert that number into an income figure at some point in the future for an unknown length of time seems an impossible task.
If the DWP is going to try to do this, then I would see the “dashboard infrastructure” as simply delivering the current holdings and values to one or more “front ends” where those assumptions could be set and possibly modified.
I should point out, if that approach is adopted, HMRC already get that data on an annual basis for almost every DC pot in the land. They also provide the state pension API which DWP use for the state pension dashboard. The technology part of joining those 2 pieces together should not be that hard.
Explaining what it means to a member of the public is very hard.
In 12 months a dashboard is possible. There is only a lack of belief and willingness.
The question I have to all the pension dashboard followers is cost.
The data is not clean.
The number of parties involved 40,000+
The range of target audience – The numerical illiterate to Oxbridge grads
And key among it all is compliant projections that actually are robust.
Without the ability to project reliably and amalgamate the results and show what
happens if I retire early or late, what is the point?
After 2+ years of wondering, thousands of hours of questioning etc. a glorified
electronic annual statement, this is not exciting or even revolutionary.
What I think would be useful is a projection year by year from age 50 to 75 showing income
possible, and the ability to choose an option and see how it plays out.
And this is deliverable and on an real cost effective basis.
But it requires education and getting peoples attention and then walking through the
steps.
Once the data projection platform is established, everyone can innovate, chop, dice,
because with such a mass of data and different needs there is no lack of opportunity,
but to establish this platform will be painful. And without the right technology impossible
because of the cost implications to all the providers.
Go to
http://www.ultraquote.co.uk
to get an idea of what is actually possible.
I disagree that such a projection tool would be useful. Tim Harford explains it far better than I can here http://timharford.com/2014/02/how-to-plan-for-your-pension/
Having said that, the infrastructure to deliver the data for the starting point of that projection should be available. Then it doesn’t matter what my view / your view of the usefulness of such projections is. Someone can build it and if people like it, great and if not try something else.
I agree with you Alan, a projection has its limitations.
The reason why they have been created is because without some reasonable projection it is easy to miss-sell something or to have an overly pessimistic or optimistic outlook.
Now the reality is all pension schemes are funded by a 3 to 5% income take out of the fund per member. More than that and the funds often deplete and the scheme fails.
Now the difference between poverty and having something is significant enough to model, with a variation of +/- 20%.
Retiring before the state pension age or after makes a big difference, enough for some to plan around this, especially if it is in the next 10 years or so. Projections help make clear these options and gives reasonably live figures.
The other value of projections is proportion. If you save just 1% of your salary even with a boost from the employer it will make little difference, but a 5% boost with a 10% top up from the employer can double the pension income likely.
This is where projections start to show how this works.
You can also compare investing in the company scheme to investing your own money in the stock market. In certain circumstances a 14% equivalent return can be created by taking the employers pension scheme route, which simply cannot be replicated elsewhere.
So we are not crystal ball gazing, but comparing like for like options. And company pension schemes are the best tool for investing for ones future, no matter how uncertain the economic situation may or may not be. And graphic representation of this can show it clearly.
When insurance first started, 50% of the money went to the salesman who sold the policy, but people benefited by being able to bury their loved ones. Today we can use our money to help safeguard our future, which today has built a fund worth £2.3 trillion pounds in the financial markets. Our social structure, and the markets themselves are interwoven in this cycle, which needs some way of being represented, which today is using projection illustrations.
I therefore believe in the value of these projections and how they show where you are.
To put this into perspective, get the equations wrong as an actuary, and your company will be closed and wound up, like Equitable Life was over the guaranteed annuity contracts. So the equations that run pension schemes and the investments behind them can also by used to create future models of likely income.