Are people this dumb?
The FT are running a story about the “pensions industry” regrouping around Plan B and doing their own dashboard. There is indeed a conference in September about this and I’d urge you to go (I hope to contribute). There is very likely to be an announcement some time in September by the DWP about what they intend to do and in the meantime – the “industry” is deliberating!
I found myself reading the FT piece and the comments of the industry and asking myself “are people really that dumb?”. Take this statement from the article.
A dashboard with partial or incomplete information risks lacking integrity at best and misleading people about their retirement position at worst,” said Tom Selby, senior analyst with AJ Bell.
Tom’s usually on the button when it comes to “industry” concerns and at the top of the list is a concern that some pension data controllers (e.g. those with legacy and occupational schemes with sub-scale administration) will be let off the hook.
The “hook” – in this context – being the flow not just of data – but of assets – as people vote with their eyeballs when they compare a rubbish old plan with a shiny new (AJ Bell style) new one.
It is very hard to see beyond “compulsion” as the reason the ABI and co. want the DWP to boss the dashboard. But the aggregation of old pots into new pots – desirable as it is to the shareholders of the big modern providers – is a scary process. There are plenty of bear traps into which the unsuspecting policyholder can fall. There are precious few people who know where the bear traps are and the paths to avoid them. What’s more, it’s easy enough for charlatans to set up and lead unsuspecting aggregators into new bear traps (of the charlatans making).
Compulsion – the last refuge of the ABI.
I am not for compulsory participation in dashboards, any more than I’m for compulsory adoption of the IDWG template for cost disclosure or indeed compulsory contributions into workplace pensions.
The success of auto-enrolment has been the small numbers of opt-outs and the high number of “stay-ins” (Remain does at least win one battle!). Had we had compulsion on pension contributions, we’d have had an outcry from the vocal minority of refuseniks and from advisers who properly were stopping their clients from contributing more. Compulsion brings all kinds of unanticipated problems and – as the Australian Royal Commission is finding – it does not necessarily benefit the consumer in terms of product efficiency.
If we accept the dictum “data is the new money”, then we can see the ABI’s call for compulsory participation in the pension dashboard, as the last gasp in a decades long plan to mandate profitability for its members from the public purse. Compulsory participation in the pension dashboard would be a licence to print money for modern pension providers.
Would an incomplete dashboard hurt us?
“Consumer detriment” is the FCA’s phrase for people like you and me risking getting ripped off. Tom Selby (and I suspect “the industry”, want a world of complete information. They know what this means – advice!
What happens when you mandate providers to send data to a single dashboard? You get people yelling – incomplete information! Because as soon as you’ve got the pension dashboard, you find yourself wanting an ISA dashboard and the next thing you know, you are subject to paralysis by analysis.
“Data creep” works against the consumer, who is beguiled into thinking that they cannot take decisions on their own, without the helping hand of an adviser. Advisers are great, they use all the right products for the product advisers.
The biggest bear-trap of all – would be the DWP bear-trap, where unsuspecting people would find themselves caught up in a multi-year build of a dashboard that would make the delivery of Cross Rail feel on time! When they finally made it onto a DWP dashboard, the first thing they would be told – would be that they should not take decisions on the information on the dashboard without taking financial advice.
That would be because the DWP (like the Pensions Regulator and Pensions Wise and even TPAS) would not have the balls to risk people taking decisions on what “incomplete information”.
Mandating the provision of information through a DWP controlled pension dashboard would be a disaster for consumers, it would force us into advice, it would stunt the growing market in PenTech, it would only benefit the incumbent pension providers.
Are people so dumb that they can’t decide on incomplete information?
Absolutely not! People take decisions on incomplete information all the time. They press buttons marked “pay”, “send” and “order” when they feel they have the right information. “Right” in this context, means “trusted”. Integrity does not have to imply completeness – it can also imply “trustworthiness”/
The integrity people need to make decisions relates to their trust in the information they can gather , not a yearning to know everything. If we had to wait for complete information we would never do anything!
People are not dumb, they will act on incomplete information and take good if not perfect decisions. We cannot hope for perfection in decision making any more than we can expect perfectly complete data-sets!
It seems to me , the biggest risks data controllers take, in restricting access to data – is to lose the data and the money behind it with people voting with their feet. The second biggest is the PR disaster that would follow such practices (witness Aegon v Pension Bee)
What’s to be done.
Simples; the DWP should return to the earlier Treasury model and focus on enabling data to flow freely between providers and dashboards in the way it is beginning to do in banking. We can have open pensions as we have open banking and that will lead to a much healthier market than could ever be achieved by the DWP owning the dashboard and acting as big brother on data.
There is plenty of “pentech” out there, the FT rightly points to Origo – I could point to organisations like MoneyHub, Pension Bee, Evestor and my own AgeWage and Pension PlayPen as examples of organisations trying to release ordinary people to take their own decisions in a sensible way
Last month, I stood in front of the pensions people in the DWP and told them to throw their dashboard into Room 101. I was not wanting an end to dashboards, I was wanting dashboards to flourish.
Let’s hope what is to be done, is to build portals of information for ordinary people to see what’s coming their way in terms of “capital” – DC and “income” – DB when they wind down from work. Income of course includes the State Pension (which is already accessible though it could be more so). DB benefits are hard to trace but easy to understand when found. It is our great hinterland of DC pensions which is most challenging.
What’s to be done – is -= as with auto-enrolment – for new players to step forward and challenge the old. What should not be done is to hand a few large providers a meal-ticket for the future by centralising the dashboard in one Government department and mandating information to flow through the DWP’s hub.
One thing’s for sure, we sure need a way to simplify pensions, and the sooner we move from the bad world of tree-destruction to a new one of easy to read digital info= the better!
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