Outcomes for dough, portals for show!
Over the weekend, I’ve been thinking about how I can judge the quality of service I receive from my pension provider. As a consumer there are a number of things I would like from my pension scheme, such as the ability to draw down my pension using all the options available under the pension freedoms, on-line access to my account and the capacity to move funds around using a portal. All these features have benefits and I can judge the benefit I am getting relative to other financial service products I can use, most especially online banking.
Actually I am quite able to take purchasing decisions if all I had to look at was the look and feel of a provider’s website and online functionality. But that shouldn’t be the end of it. There are more important things that I need than a good user experience.
But I work on the basis that while these portals are great for show, what really matter is what is happening to my dough.
I am more interested in answers to questions like
How sure can I be that my contribution records have been kept up to date?
Have all my contributions been invested in a timely way?
Does my current pension pot accurately represent all transactions on my account?
We cannot be sure the value we see online or on a paper statement is the right number. There are all kinds of errors that occur and the longer we’ve saved , the greater the possibility of a data error. Which is why trust is so important and why most DC pensions have trustees. The pensions that don’t have trustees (personal pensions) now have people watching over our pensions, making sure that we can trust the outcomes of our savings.
It would be good to know that we can trust the record keeping of our pension administrators and for the most part we can. But there is always an element of doubt and where there is doubt, trust can break down. So good trustees test the data they hold to make sure it is clean.
Unfortunately it is not always clean and it is one of Ros Altmann’s bug-bears that the amount contributed to our workplace pension by our employers may also be wrong. Because pension rules are complicated, we need our data cleansed. We also need strong regulators capable of doing spot-checks on data and we need firm whistle-blowing from auditors and payroll to ensure when things go awry, they are flagged to the regulator.
I am comfortable that in the current world of master trust authorization and with strong controls in place among the small numbers of insurers and SIPPs operating in the workplace pension market, current record keeping standards are high.
Organisations like PASA, the PMI and the CIPP see to that.
The ongoing reluctance of many pension firms to put their data on open display via a pension dashboard does not fill me with confidence. Last week I spoke on this with the Pensions Minister and he made it clear that firms who do not want to participate in the dashboard project must explain why. What is it that makes them uncomfortable about the data they should be sharing with their customers – the savers?
I share this worry. When AgeWage analyses a data set, we record what we call outliers. An outlier occurs when a contribution history of an individual when compared with the value of the pot (the NAV) shows that a dubious return has been achieved for the member.
We have seen the data sets we analyse have between 0.5% and 28% outlier rate.
By dubious, we mean that the return we record for the members deviates from the norm by an amount that makes it abnormal- I am reminded of my favorite data cartoon
Where individuals and groups of individuals, show data that doesn’t conform to normal data distribution, trustees and IGCs should ask questions.
One of those questions should be whether the data is right and whether there is an issue with the quality of service.
The dashboard data anomaly
For me here is the dashboard anomaly. Some pension schemes claim to be dashboard ready today.
But we have delays on the dashboard because many DC pension schemes say they cannot provide an online interface with the dashboard.
The Pension Dashboard Programme suggests that we are still years away from even finding who has our money
And yet the trustees , IGCs and GAAs of schemes that cannot even tell the dashboard whose records they keep are claiming they are giving members and policyholders good value for money.
I cannot see how both statements can be true at the same time.
How can pensions be giving savers Value For Money but not be dashboard ready?
A simple quality test all schemes could take (and for free).
AgeWage is currently running a pilot with the CIPP to test workplace pensions for value for money. One of the outputs of each test is an AgeWage score for the aggregate data. Another output is an outlier score where we tell schemes the percentage of contribution sets we analysed which are anomalous. If you are a member of the CIPP, you can get your scheme’s data analysed for free by AgeWage.
If you are not a member of the CIPP, you should contact email@example.com for a quote on the cost of this service to your organisation.