There is a strong tradition in this country of delivering services through “not for profit” organisations. Such organisations have been self-sustainable because of the endowments or trust funds that support their management.
The most obvious manifestation of the not for profit spirit in pensions is in the management of occupational pensions which has traditionally been conducted by a mixture of paid officials (the executive) and unpaid trustees. The lines are blurred a little by the rise of professional (paid) trustees and of “fiduciary management” where the executive and the trustee are one, but the principal of “not for the profit of shareholders” is maintained because of the capacity of some large and continuous sum of money to meet the bills.
We have yet to find a way to be paid in data.
Many now argue that data is the new currency. But this has not yet led to the establishment of data-centric trusts where data pays the bills.
The notion of Fintech is driven by equity participation – typically the aim of those holding the equity is to participate in profit not from the data , but from the underlying funds. Robo-advice is not paid generally paid against the quality of the information from income, but from a capital reservoir that generates fractional fees (ad valorem).
Firm such as pensionsync that charge not against a fund but for the transfer of data are very rare – very pure. (It’s good to see Ros Altmann putting her name down as Pensionsync’s chair).
But Pensionsync is an exception – not the rule. It’s biggest challenge is being paid, since it cannot be paid in the currency of data. It has to convert the value of data into something else, the current vision is that its data can generate value for companies and those who supply them , by sharing the pension decision making of their and others staff. This data informs on what staff do and what they are like, it builds a picture for those who want to construct employee benefit programs
Herein the challenge for a pension dashboard
The challenge for the DWP is to create a sustainable commercial model for the dashboard. NEST was always going to be a winner for the DWP because it works to the classic fractional charging model where a small charge over a huge asset base can repay £1bn + loans in time. The Treasury were happy with the NEST business case – provided NEST assumed a quasi monopoly and was given flexible terms for its loan. NEST is a classic not for profit, like the PPF, it will become self-sustainable , move into quasi-profit and ultimately it will be able to reduce its price (AMC or levy). In the case of the PPF, it might ultimately be able to increase benefits out of its own revenues.
The dashboard has yet to find a way to generate the revenues so important for “not for profit sustainability”. The dashboard has no fund and is therefore required, like PensionSync, to survive on levies. But levies are not sustainable unless the public perceives they are giving value for money and there is a fundamental flaw in the pension dashboard it has a very limited value proposition.
What is the pension dashboard’s value proposition?
As it is generally articulated by its advocates, the proposition is that the dashboard will allow us to see all our pensions and pension pots in one place. While this is extremely easy to visualise and engage with, once the delight of having a single view of your in-retirement finances has been enjoyed, the application of the dashboard is very limited.
- Unlike the social media sites – which are becoming platforms to sell things
- Unlike the challenger banks – which are becoming platforms to sell things
- Unlike the software vendors (from pensionsync to Sage) – which are becoming platforms to sell things
A Government run pension dashboard can sell nothing.
It is simply a utility that depends for its sustainability on the goodwill of the tax-payer to maintain its debt or the unaminity of all participants to pay for it – by means of a levy – a tax.
And herein lies the biggest flaw of all. Not all the participants who pay the levy to keep the dashboard going , are going to be winners. Some will pay to lose. That is not an attractive proposition.
Why pay to lose?
Paying a levy when you are an insurer with the prospect of a net-inflow of assets is entirely acceptable, it forms part of your marketing budget. The ABI are able to sell the dashboard to its members as more than pro-bono, it is a means of getting net-inflows.
It could be argued that the dashboard, value-agnostic as it will be , is a means of neutralising the debate on what is good and what is not. £100,000 in a fund with no prospects for growth looks like £100,000 in a fund with a 10% guaranteed growth rate. The dashboard by definition is a snapshot of the current capital and income achieved.
So the dashboard is a marketers dream. It makes the losers win and the winners losers. Since the majority of the marketers work for the commercial for profits, it is clear to see why the ABI – which represents them – is a keen advocate of a value-agnostic state run dash-board.
By comparison, the big not for profit pension schemes, which are already being pillaged by the insurers and Sipp providers with the big marketing and distribution budgets, quite rightly point out that a value-agnostic dasboard, makes their capital bases – sitting ducks!
Why should the pension trusts pay for the right to be shot at by their more commercial rivals.
14,000 people can be wrong.
The last time I looked, 14,000 people had signed a petition to save the Government version of the pension dashboard. I am with Paul Lewis in staring at this figure with incredulity!
The dashboard doesn’t exist. Have you seen one? You might as well save the unicorn. It is a mythical idea that, if possible and perfect, would be quite useful. But of all the things to petition Ms McVey about….
— Paul Lewis (@paullewismoney) July 19, 2018
The reality is of course that having spent on NEST, the DWP has not got the appetite to spend on a dashboard which could become a sales platform for the ABI’s members.
My understanding is that the DWP are rather more interested in trying to make Universal Credit work, or at least limiting the downside of it not working.
It would be considerably easier for the DWP to revert to plan A and put dashboards in the hands of people who want to offer pension comparison as part of their business as usual, by whom I mean the comparison sites.
The comparison sites are the natural home for dashboards.
What would be best for consumers in this country, would be an ability for them to organise their financial affairs on the basis of easily accessible and digestible information. This is not a contention , it is a fact – based on the behaviour of the British Public. MoneySupermarket had 24.9m people give it their data last year so that 24.9m could get the best deal on something or other.
Only a tiny number of those people did pension deals because there is (currently) no pension aisle in the supermarket. Were there to be, it would almost certainly be because the comparison sites had found a way to bring together people’s pension data and compare the various policies and funds into which they are invested and find a way for the money to aggregate with commercial advantage to themselves.
This may sound brutal but it’s not. It’s exactly what the comparison sites have been doing with bank accounts, utilities, mortgages and insurance for years.
The creation of one big dashboard by the insurers is not just a way of creating a value-agnostic flat field for the insurance companies marketing teams, it is a way for them to avoid the invidious comparisons with their leaner less-commercial competitors – aka the not for profits.
I know there are commercial not for profits (Royal London and B&CE) and I know that some for-profits produce good value, but let’s answer the exam question set in the title.
“For profit” can deliver, but it won’t deliver to the standards of “not for profit” investments , unless it is promoted. The Pension Dashboard is the way that the ABI has found for Government to fund the promotion of for profit funds. Their feverish attempts to salvage the dashboard from imminent return to the private sector confirms to me that I am right.
We are better off with multiple dashboards that sit within comparison sites than one big dashboard that gives the commercial pension providers a free run at marketing.
The dashboard is dead, long live dashboards.