If you follow pension news stories, you’ll know that the Work and Pensions Secretary has been anything but enthusiastic about her department’s commitment to produce a pension dashboard by 2019. The Government first proposed it could it help in 2016 and back in the day the Treasury wanted to do no more than facilitate access for the private sector.
The vision of one great big dashboard came from the Association of British Insurers for whom a single data display meant more control and less work. Unfortunately, it now appears that the unintended consequence of centralisation, has been bureaucratic paralysis. The timetable for the DWP’s feasibility was originally March 2019, McVey’s comments were in mid-July – with no report in sight.
As anyone who deals in data knows, we have seen a sea-change in data management since 2016. GDPR, open-banking standards, APIs and smartphones are now part of our work and lifestyles. The concept of the dashboard harks back to the instrument panels on our cars. Many of us no longer have cars! Many of the people who will need dashboards may never use a computer screen again. The optimal screen for a dashboard is quite different from what was being planned for earlier in the decade.
We now manage our accounts, pay our tax and check our payslips on our phones and those who manage our user experiences know that how we navigate information is changing. We scroll. You obviously cannot scroll when checking for the speed of your car – perhaps we need a new name for the dashboard.
Why we have a problem.
There has been a lot of anger at the possible demise of the dashboard and most has come from those who have done the pioneering works on prototypes. Pension experts rightly argue that if we can’t have a way of aggregating the various pots we’ve built up, we will have difficulty managing them into a spendable format.
People would clearly like to aggregate their little pots into one big pot and use that to drawdown an income or buy an annuity of simply manage their bequest to a subsequent generation.
The DWP estimate that if we carry on the way we’re going, by 2050 we’ll have 50m abandoned pots. By “abandoned”, they mean pots into which no further money will be paid.
In 2011, research by the DWP indicated that UK employees have on average 11 jobs in their careers, with a quarter of workers working for more than 14 employers.
With auto-enrolment now offering us a new pot each time we change jobs, the problem of a fractured pension experience is set to get worse.
What are the alternatives?
If the DWP is looking for a long-term alternative to a dashboard, they might look to the workplace pension providers and payroll. While they may not be perfect, the workplace pensions that will survive the new legislation being introduced this autumn will be among the most efficient defined contribution retirement savings schemes in the world.
Unsurprisingly, those who run these pensions are looking to build lifetime customers and are beginning to lobby for a pension follows worker system where payroll clears contributions to a variety of providers at the instruction of the member. This is the “hub” system in operation in Australia and technology providers such as Pensionsync are expressing interest in acting as clearing houses for payroll. There’s considerable support for this approach from organisations as varied as Hargreaves Lansdown and Share Action.
But while such a system may be a break to future pot-proliferation, it cannot deal with the legacy of the past. While the pension experts continue to argue for the merits of engagement, created by the aggregated view of a dashboard, the DWP don’t seem so sure. Speaking at a recent conference, Charlotte Clark, the DWPs head of pensions strategy told a surprised audience she no longer believed engagement was enough.
Clark’s background is in the Treasury and she’s a pragmatist. The Treasury has long been an advocate of “enlightened self-interest” a philosophy that translates into the question “what’s in it for us”. A centralised pensions dashboard run by the DWP has all the hallmarks of a “vanity project” for those in the Treasury, smarting from the prospect of the DWP’s NEST loan reaching £1.2bn.
By comparison, the private sector sees the prospect of aggregating small pots with considerable self-interest. Procurement fees paid from the marketing budgets of workplace pension and SIPP providers need not be massive, for those running commercial aggregation services to make a decent living. This is supposing they can give people a clear view of what they’ve got and what’s available to them,
The obvious candidates to run private sector dashboards are the comparison websites. It’s easy to see how they could replicate the success they’ve had with ISAs, life insurance and mortgages. 24.9m gave their data to MoneySupermarket last year, dwarfing the numbers who sought formal financial advice (only 6% of the working population according to the FCA).
Could these masters of digital technology do for our pensions legacy, what payroll can do for the future?
My conclusion is that the reluctance of the DWP to get on with building a centralised dashboard is for three reasons. Firstly, they see the dashboard as originally conceived as conceptually obsolescent, secondly they are falling out of love with the doctrine of engagement and thirdly, they are being told by those in the private sector, that the job can better be done by those driven by “enlightened self-interest”.