Yesterday I wrote about the importance of delivering a dashboard competitively. To sum my argument up, I think that those prepared to supply the technology needed to find people’s pensions should not compete for the work through a Government led “procurement process” but through a tech-sprint, where they prove to themselves, to Government and to their key customers – us pension savers – they can do the job accurately and at a competitive price.
I am not arguing to sabotage the concept of a single not for profit dashboard set within the new Single Financial Guidance Body, that is a useful first step. Nor am I arguing against a governance body set up by the SFGB to establish processes and controls to minimise risks of things going wrong. I accept the SFGB as the initial home of the dashboard and governance committee. But I am going against the consultation suggestion that there is just one pension finder service.
In this blog, I explain the benefits of competition between pension finder services to consumers and set out the principles by which these services can work together to deliver us our pension information, quicker, cheaper and with greater focus on the needs of ordinary people.
There is nothing so laborious as a Government led procurement process. Things happen consecutively, not in parallel, once appointed – the pace of development is dictated not by competition but by timelines agreed by all. Inevitably these timelines are conservative, they do not encourage entrepreneurship, things arrive late – or to deadlines which are way too slow.
Consumers are keen to find their £20bn lost money, to see all their pension pots on one screen, to get on with managing these pots to provide them with financial security in later life. Having wasted a lot of time already, they will not tolerate yet more buraucracy.
If anyone is under any illusion that the pension finder service will be free, then they are nuts. The cost of development and of management will be passed on to those benefiting from the dashboard. In the first place the costs will be picked up by levies on the industry, but these will be passed on to ordinary consumers. It is easy for these costs to be worked into Annual Management Charges or the hidden costs of managing pensions, but that doesn’t make them costs born by the consumer.
Transparency is the best disinfectant, if we are not to have a scandal down the line we need to be open about costs incurred.
Giving the pension finder service to a single organisation risks giving that organisation the right to set the price. If the price is set by Government, the price will either be too high or too low, if too high, the single service will plead it cannot do the work and force a change in pricing structure (see what is happening with price controls in the energy sector). Alternatively, if the price is too high, the pension finder -even if not for profit – will be as happy as Cedric the Pig.
The only way to ensure a competitive price is to put competition to work. This is why NEST is not the only workplace pension provider. Competition is thriving in workplace pensions because NEST were not given a state monopoly.
As I wrote in my blog “no man cometh unto the dashboard but by me“, restricting the plumbing to just one organisation assumes only one way to deliver information. It’s the pension finder’s way or do it yourself – with the pension finder able to tell providers to refer all private requests to them.
People have different needs – they want to find different things. Similarly, pension providers need different approaches. A defined benefit scheme’s administrators see dashboards in a different way to those of a self invested personal pension. The problems of providing data from a legacy insured system are quite different than from a modern database run by a recently started master trust. Different pension finder services will relate to these problems in different ways, some better than others.
In time, the dashboards will become more or less relevant to differing groups of consumers as dashboard focus on their needs and the needs of the pension administrators who supply the data. This focus needs innovation and that innovation flows from diversity and competition. It is unlikely to happen because of a single approach which is inherently generalist and unfocussed.
We can have competition and collaboration
It’s often noted that we have in Britain a very complex pension system with people having a lot of different pension pots and pension rights.
Some people think that we need a single pension finder service to bring everything together. But this is not what happens in other areas of competition. The introduction of open banking is a case in point. Banks now collaborate and compete in equal measure. The customers are well served by this, getting data more quickly, more cheaply and with much greater focus on their needs. We are already enjoying faster payments and integrated statements (Lloyds and Scottish Widows for instance).
Agreeing to work with open data standards, the retail banks have opened competition to Challenger Banks who they are now working with – and learning from. This is because the Challenger Banks are doing things quicker, cheaper and with greater focus.
When I see PensionBee and People’s Pension join Orio and the ABI, I see a willingness from those who challenge traditional ways of doing things in pensions wanting to work with traditional providers.
I want to be a part of a revolution not an evolution in pension information. We cannot move forward at the pace people want by doing things as we always have, that means repeating yesterday’s mistakes. Instead we need to move forward by working together competitively.
The way it can work
A long time ago, Britain built a rail network which we still use today. It was based on common standards (track width etc) but it spawned massive innovation both in terms of network coverage and in the delivery of “customer journeys”.
The innovators sometimes had to bite their lip and accept second best (Brunel’s broad gauge for instance), but for the most part- the innovators won through and it is they who we remember today.
The dashboard can work through a similar combination of innovation, consensus, collaboration and consensus.
I am quite sure that if we had set up in the 1830s a single rail network to deliver a rail system, most of the magnificent lines that we enjoy today would not have been built. A Government appointed railway governance body would not have accepted the challenge of a tunnel, a viaduct – of building a railway accross a bog like Rannoch Moor.
People do crazy things and often screw up. But in screwing up, they learn and do things better next time.
The way the dashboard can work is by letting people loose, by allowing them to sprint towards a target and sort each other out. By helping them to help each other so that everybody wins.
This is what we mean by open pensions.