King Canute was wise enough to know he could not hold back the incoming tide. This blog is about two decisions taken in the House of Lords which suggest that our peers have not learned that lesson.
I have just read the debate on Amendment 52 and Amendment 63 of the Pension Schemes Bill put forward by Jeannie Drake with the support of Ros Altmann and others.
While all these peers believe they are acting in the consumer’s interests, none has put themselves in the shoes of said consumer. Consumers are arriving in a tide of 650,000 a year to an age at which they can exercise their pension freedoms. They have been promised the tools to find and see their pensions and their pension pots. They can no more be stopped creating and using dashboards than the Canute could stop the waves of the sea.
People who get to 55 recognize it as a magic number. Like 60 (when many of us can get a bus pass, or 65 when we used to start drawing our state pension, 55 is now a significant age as it marks the point when you can have your pension savings back.
Pension pots, which have been locked down can now be accessed , a quarter tax-free. Money which was previously considered unavailable is now free to spend without need of an annuity.
The obvious first step for anyone preparing for this auspicious birthday is to find their pension pots which, while laborious, is generally possible to do. If you can’t find your pension there are a number of services you can use to track them down. These pension finder services have sprung up to help consumers and to create ways for people to see their pots in one place and model what they might pay the consumer by way of a wage for life.
In order to see all the pots on the same page, someone finding pension pots tends to create a spreadsheet or a written list so that they can make sure they’re getting to a point where they can bring these troublesome pots into one big pot. Although people don’t call these spreadsheets or written lists “dashboards”, that is what they are.
For those who have advisers, the adviser creates the dashboard by finding people’s pensions. This is going on now and has been going on for as long as I’ve been advising on pensions.
What the House of Lords want
The House of Lords, who don’t seem to be familiar with what is already going on , have decided to vote through an amendment (52) which creates a requirement that a pensions dashboard service may not include a facility for engaging in financial transaction activities.”
And a further amendment (63) that ensures that the publicly owned pension dashboard service has been operating for one year and the Government has reported to parliament on its operation and effectiveness before commercial dashboard services can qualify.
The case against the amendment
I strongly believe that Amendment 52 is the wrong way to go. It would deny people the right to take control of their financial situation. It actively seeks to frustrate. It would mean that consumers, even when properly advised and informed, would have to follow a parallel track to execute their wishes. It may even go so far that it could stop dashboard providers developing useful modelling tools that could, for example, inform people of the potential benefits of increasing their contributions or the impact of increased earnings. This amendment risks stifling future innovations that could demonstrably benefit consumers.
Frankly amendment 52 will amaze savers. If you have had your pensions found and displayed, you will want to aggregate and follow your investment pathway and nothing that the Pension Schemes Act could do , could stop you executing your wishes. It is your money, it may be a Government Dashboard but you don’t have to be a coder to screen grab your dashboard and get on with what you have in mind.
As for Amendment 63, here is Baroness Neville-Rolfe (who spent the majority of her career in retail with Tesco)
For me, Amendment 63 takes the biscuit, because the Government have agreed to bring in a Money and Pensions Service dashboard so that there is a government, public-funded version that includes people’s various pension pots and the old-age pension. The proponents of this amendment are then trying to exclude the trail-blazing commercial version, which was behind the Bill in the first place and is designed to help savers, building on the good practice that exists out there in the best pension funds and elsewhere. The amendment would lead to a delay of a year for those dashboards, yet they will all be properly regulated and monitored and MaPS would be in the lead. Competition from others will be an incentive to quality and speed, helping to identify the bugs that the noble Baroness, Lady Drake, who knows so much about pensions, referred to.
To this I would add the interpretation of the amendment by Lord Young of Cookham.
I think that we had a new commitment from my noble friend this evening which I welcome, which was that no one would be able to provide a pensions dashboard before MaPS. I am not sure that we have had that before. I wonder whether there will be some legislative underpinning of that commitment, which I would very much welcome.
This interpretation suggests that any adviser finding and displaying a client’s pots in a digital way, might be accused of running a commercial dashboard. This is absolutely against the consumer’s interest and could lead to planning blight on pension consolidation for five years (assuming the MAPS dashboard opens in 2024).
It begs the question “when does a fact find become a dashboard” and a further question as to why the FCA should on one hand be encouraging “know your client” and on the other banning the display of the fact-find that results.
At a time when pot proliferation is escalating as millions of us face losing our jobs, the Pensions Schemes Bill looks like turning into a shambles for pension consolidation.
A well meaning mess
I am a fan of Jeannie Drake and Ros Altmann as consumer champions but I am not a fan of amendments 52 and 63.
Jeannie Drake is now a trustee of People’s Pension and will know full well the impact of pot proliferation on the capacity of that not-for-profit to provide a sustainable service.
Ros Altmann knows full well that many small and pots are not providing value to members of workplace pensions and that most legacy pots are poor value relative to modern plan and should (once you’ve got to 55) be upgraded.
Organisations trying to find a way to help ordinary people by offering services in a digital way are going to look at these amendments and ask what incentive there is to help turn pension pots into retirement plans.