The Government is minded to tender a single contract to run a pension finder service. This is a regressive strategy which we need to say NO to.
Giving control of the pension dashboard’s central piece of architecture to a single organisation or even a consortium, will not be in the public’s interest. It risks one entity controlling not just the price of the service, but what the service delivers. It risks outage of the service with no back-up and it denies potential competitors the chance to innovate.
The only reason why Government would grant a monopoly to the provider of the pension finder service were there to be no demand for competition. There is demand for competition and there are plenty of competitors to the current front-runner for the pension finder contract.
Not only is there demand for competition, potential competitors but there are clear advantages to Government in not granting a monopoly. Just as at the start of auto-enrolment – when the DWP fervently wanted NEST to be given a monopoly as the workplace pensions, so today. The reason NEST was not given a monopoly was so that insurers and master trusts and even SIPP providers could compete for workplace business and create a dynamic innovative market. That is exactly what we’ve got.
One of the glories of the UK pension system is its diversity. Public and private pension schemes still provide defined benefits. We have a vibrant market for personal savings, a well developed wealth management industry. The large insurers operate master trusts and GPPs that compete with NEST and the non-insured master trusts, many of which are run by consultants.
To suppose that a single pension finder service will harmonise the competing forces is naive. There is no such harmony today nor is there likely to be tomorrow. Despite the opportunity to do so, most third party administrators have not signed up to the Origo transfer hub, they are showing no signs of wanting to be bullied into line for a single pension finder service.
There are local sensitivities at play which make the arguments for a single pension finder service untenable.
A better way of doing things
There is an alternative approach to the pension finder service which I am promoting. I call it the “tech-sprint” approach and it allows any competitor for the job of finding pensions to set out in a race for success. A tech-sprint would do away with the need for a central tender and would replace it by a genuine competition to get total coverage of the UK pension genome in the shortest possible time.
Let me make this a little less abstract. Let’s say that one particular data service has strong connections with insurers, then that data service provider naturally plugs into the APIs at the insurers, encouraging their adoption using its particular knowledge of that sector.
Another service provider is familiar to third party administrators and does a similar job in that sector
A third service provider works best with SIPP providers and the IFA community.
Each provider builds up expertise in its sector and is given the all important verification certificate to collect information that finds pensions and that later can deliver the more complex information that will populate dashboards.
An inquiry from a consumer may be initiated with a pension finder who is expert with insurers but may be passed on to other pension finder services. All the data is fed initially into one dashboard operated by the Single Financial Guidance Body. Once the concept has been proven , the commercial dashboards can use this diverse infrastructure in the same way.
One critical advantage of this approach is that it gives the weakest links in the dashboard project – those with the poor data and poor systems , the chance to work with pension finders who are sympathetic and can help.
Another advantage is that it keeps the threat of cartel-pricing at bay. A monopoly can too easily create a cartel (a rigged-market). It is human nature, if you’ve got a monopoly to sit back and stop pushing. Indeed my experience of these central tenders is that they are so exhausting – they leave all parties – winners and losers – disincentivise to push for better going forward.
An example of this was the procurement process that happened for the dashboard prototype in 2017. The winner excluded all the losers and then sat on the prototype which has gone nowhere. We are in danger of delivering exactly the same thing again in 2019.
The pensions dashboard is exciting – it captures the public’s imagination, it’s potentially a fantastic win for everybody. But to properly deliver it needs to be adopted by all providers as quickly as possible (ok we can let SIPP and EPPs opt-out if they choose).
But the timeframes envisaged by the industry are ludicrously long. Even if SFGB’s dashboard is up and running by the end of 2019, pension finder won’t be fully functional for 2-3 years after. We all know what happens to these timelines, we’ve already seen it happen with the feasibility study, just look at the delivery of CrossRail.
Where things get delivered to time is when they are powered by private sector innovation and competition. Look how the private sector found ways to auto-enrol 10m new savers through 1m new employers.
I am not having a go at those who want a single pension finder service, I thoroughly understand where they are and where they are coming from. I’ve had good meetings with Origo and suspect that it will be top dog where multiple pension finder services are in play. But I can’t support Origo, or any other single pension finder.
The biggest danger is that we will sleep-walk into a monopoly; which is why you’ll be hearing a lot more noise from me and my mates on this!