Pension Bee has produced two important papers in the past week. The first is its response to the FCA’s call for input on Open Finance
The second is yesterday’s public call to action to bring open pensions as part of the open finance initiative.
Pension Bee identify twelve pension providers who stand in relation to pensions as the “CMA9” stood in relation to banks. With their co-operation 80% of hidden pension data could be opened up to those saving for their retirement.
These providers are
- Aviva (including Friends Life, Friends Provident)
- Scottish Widows (including Zurich workplace, Clerical Medical)
- Legal & General
- Standard Life
- Royal London (including Scottish Life)
- Aegon (including BlackRock)
- Phoenix Life (including Abbey Life)
- Nest – regulated by The Pensions Regulator
- People’s Pension – regulated by The Pensions Regulator
- NOW Pensions – regulated by The Pensions Regulator
(We might reduce this to 11 if we consider Standard Life as part of the Phoenix Group)
Pension Bee refer to these 12 providers as the “Directed 12” for reasons that will become apparent as you read on.
The CMA9 and the Directed12
The CMA9 are the nine largest banks in the UK, as determined by the Competition and Markets Authority (CMA) as part of the Open Banking initiative. The CMA is an independent department of the UK government, whose aim is to promote market competition and fairness and reduce any harmful monopolies.
When the Government decided to intervene to make banking more open, they used the CMA to create data standards that have led to our being able to pass money between us a lot more easily and to our benefit. Open banking is in its infancy, but has been successful because of its adoption by these large banks.
I am quite sure that Pension Bee are drawing a parallel between the CMA9 and the Pensions12.
Not “lost” but not “owned”.
Pension Bee’s key insight is that its data tells it most pensions are not lost to their owners.The vast majority of savers know who their provider is.
In fact, Pension Bee’s customers know the name of their provider for 70% of the pensions they transfer (based on nearly 250,000 records). But knowing who provides your pension is not the same as knowing your pension.
In order to receive information on that pension, savers are usually required to sign paper forms, sending their valuable information all around the postal system. It can take several months for a saver to receive a reply to their request for basic information. Consumers cannot have “ownership”, as the government asks them to, if they cannot access basic information like balances, charges, performance and investments easily online.
The dashboard finds but won’t grant ownership
I’m quoting her from Pension Bee’s response to the FCA’s call for input on Open Finance
That pensions can become “lost” is a concept well-recognised in the pensions industry.
Lost pensions are estimated by the ABI to be a £20 billion problem. In recognition of this problem, the dashboard’s main priority in the short to medium term is to reunite owners with ‘lost’ pensions.
These pensions could be held with one of 40,000 possible schemes, with wildly differing levels of data preparedness and access to resources. The dashboard or more accurately, the ‘pensions finder service’, will likely stay focused on achieving maximum coverage, which will undoubtedly result in minimal levels of information being shared with consumers.
It will take many years to achieve even this.
If the pensions dashboard is charged with providing people with ownership of their pensions, it will not open this decade.
Open pensions can’t find pensions but can grant ownership
Pension Bee propose (and AgeWage seconds) that the twelve providers be compelled by the FCA to open up pension data via open source APIs.
This is the only way to allow the transformative potential of open finance to be realised early enough to create happier, more prosperous retirements for a generation.
These 12 providers become the Directed 12 as the 9 Banks became the CMA9. Open banking becomes open pensions with the help of the open finance initiative.
We don’t need a dashboard or open pensions – we need both NOW!
The pensions dashboard should more properly known as the pension finder service. If it does no more than find the £20bn of lost pensions that the ABI and PPI confirm are currently lost, it will have done a great thing.
But the delivery of the dashboard is being delayed again and again because it is trying to do too much, it is trying to be everything to everyone and is doing nothing.
Pension Bee’s suggestion is radical and it’s simple. It allows the pension dashboard to crack on without any further arguments about what is on the dashboard (just telling us where our money is).
Open pensions then allows savers access to Pension Bee’s estimated 80% of data which can be accessed online in real time , because it arrives though open source APIs (digital gateways).
No doubt there will be many providers not on this list , who will want to , and be able to , adopt APIs very quickly. I’m thinking of Smart Pensions, Hargreaves Lansdown and Pension Bee but also many of the smaller master trusts and some of the larger occupational DC schemes.
There will be a long tail of occupational DC schemes and a few FCA regulated SIPPs , who will not be joining the queue any time soon. They will have their work cut out complying with the dashboards requirement that they provide access to membership inquiries.
Meanwhile, those providers inside the Directed 12 and those who want to join them, will need to sign up to a data template that will meet the needs of those who want ownership of their pensions. This data template (distinct from the standard for the dashboard) will enable people to see their funds, fund values, contribution histories and cost and charges on their account. In short it will allow them to see the value they are getting and the money they are paying for their investments.
It may provide more, it may give access to the individual holdings within the funds so that people can determine how responsible the investment strategy, it might even give people the chance to influence how their fund is managed.
We need a pension finding data standard and an open pensions data standard
What this boils down to is two data standards, a simple one to find our pensions and a much bigger one to find out about our pensions.
The genius of Pension Bee’s proposal is that it makes both possible quickly without compromising the aims of Government for pension ownership.
Like every great idea, it is radically simple. It is the key that unlocks the door and I hope that both the FCA and the DWP, who are the policy leads for open finance and the dashboard, adopt the suggested approach.
If they don’t, I could be writing the same blog in five year’s time.