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!
But would you like this blog delivered you in the post?
I agree with the view that pelple should have full information about pensions. However it is not good use of language to ask if people are too “dumb” to make their d own decisions as this implies only “dumb” people make bad decisions. There are many reasons to keep higher charging contracts eg loss of protected tax free cash, loss of guaranteed annuity rates, large market value reductions, loss of life assurance for uninsurable individuals to name a few. So being prompted to consider taking advice is not a bad thing as without help and guidance people could lose valuable benefits in taking an ostensibly sensible decision to transfer out of higher charging lower value for money contracts. Such people would not be “dumb” they would just be unaware of the unintended consequences of their actions.
I agree with you Brian. Somewhat like my repeating of part of what Henry said, i.e. we read most of what we have to put in front of clients. If we were tied advisers, we would haev read all of it and known the product inside and out. As it is, as Independant Advisers, we can’t have read everything, but we know a lot more than clients do, so we can save them time (and money) by them paying us to know what to do based on their circumstances and what they haven’t read about their existing plans.
What a brilliant set of words which actually explains why many people use an adviser. The rules which have built up over the 26 years I have doen this job have resulted in us being forced to give clients so much information that they simpy can’t read all of it ebfore making a decision, so our job has become to precise it and “speak” to the main points leaving them to read whatever extra they want and be available to answer any questions triggered.
I’ll repeat Henry’s paragrapgh I am referring to.
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!
I’m with Simon Kirby, who while he was the minister responsible for Dashboard, said that he found reading a book where someone else had already torn out half the pages pretty confusing and hard to work out was really going on.
Adrian
“I am not for compulsory participation in dashboards,…Had we had compulsion on pension contributions, we’d have had an outcry from the vocal minority of refuseniks”
There’s a big difference between people opting out and institutions. If savers want their information in the dashboard, but pension providers don’t want it, then I’d go with the savers. I can’t see many savers who wouldn’t want it – why would they?
All of this totally ignores the fact that information is not presently being restricted, it just isn’t centralised.
The whole purpose (I assume) of the dashboard is to aid people in planning for retirement.
Therefore you are assuming that it is high enough in their priorities to invest some time and thought, in other words that they care.
I would surmise that if you cared, this would be obvious because you would already have invested time and effort into your plans to date, know where your existing pensions were, how they were invested etc.
I recall when Wrap was first introduced in the UK over a decade ago it was supposed to address the ‘issue’ of “too many plans all over the place”. I guess the limited use of this functionality tells you that either: there is little demand for this, or it isn’t really an issue.
I suppose if I had an active interest in pushing consolidator software/algorithms, then I might feel inclined to make it an issue to suit my narrative…
DC – it may also be about 94% of the population not visiting IFAs and regarding wraps as something you buy in Subway. There are plenty of ways to help people and some of us are doing what we can to help those who are helpless. Ordinary people are not at fault for not being able to consolidate their pensions unaided. We need a proper consolidation service,
Henry, my point is that HOW could you maintain that this cannot be accomplished by contacting your existing providers and requesting a statement from each?
Having these hard copies IS consolidation (in rudimentary terms).
Who is to the be the arbiter of the inherent value of the existing plans (as the secondary concern)?
If people are truly as hopeless as you make them out to be (not even being able to literally gather the hard facts by requesting a statement for example), how can they reasonably be expected to perform a proper analysis of what they have vs the pros/cons of an alternative arrangement?
People are also capable of ruining things for themselves without the help of an adviser! Perhaps even more so, except they won’t have anyone else to blame.
I honestly don’t see lack of dashboards as the problem it is being made out to be. It just seems that another bunch of ‘hangers on’ will be present to extract their own profit from a situation they have themselves created.