Submission to the Committee scrutinising the Pension Schemes Bill
1, This submission from Henry Tapper in his capacity as CEO of AgeWage and Chairperson of the Pension PlayPen. These private companies are digital resources for individuals and employers to make informed decisions on their workplace pensions and non-workplace legacy DC schemes. AgeWage is currently exploring whether guidance can be given individuals on choosing pensions, consolidating pensions and spending pension pots. It is doing so with the assistance of the FCA in the FCA regulatory sandbox. Our view is that technology can help consumers take informed decisions but that guidance (like advice) needs to be delivered in a regulated way.
2, We believe that the amendments in the name of Baroness Drake will be against the interests of consumers who need a pension dashboard to find lost pensions and have access to their providers to make decisions about choice, consolidation and the spending of benefits.
3,There is evidence that MaPS is extremely good at delivering high level information about options but are not able to give detailed guidance at the granular level of individual policies. If the MaPS dashboard has no transactional capabilities and commercial providers operate on a T+1 basis where T is the yet to be communicated launch date of the MaPS dashboard then the public will be denied the detailed guidance they need to manager their retirement affairs.
4, The main reasons given for preventing transactional capability on the dashboard is concern over people taking decisions without advice. This is certainly a concern where there are safeguarded benefits within the ceding scheme. But most pension pots since 2000 have no safeguarded benefits and have been set up if not as stakeholder pensions, in the spirit of stakeholder pensions (which were designed to provide portability without need of advice).
5, What is needed for pension dashboards to operate successfully is to recognise the vast majority of pension pots that are not carrying safeguarded benefits and legislate around them. It is up to regulators, especially the FCA, but also tPR, to ensure that member’s benefits are protected. The Drake amendments close the door on innovation and good practice to shut out poor practice and indeed scamming. However, poor practice and scamming focusses on larger pots and especially on defined benefit rights where the FCA report, the average loss to members is £82,000 per victim. There is no evidence that scammers are targeting smaller pots and we recommend that the Government sets a limit below which pots can be transferred not just without advice, but at the click of a mouse from the pensions dashboard.
6, The amendments in the name of Baroness Drake would have a second impact which would be systemic and negative. There is a reluctance amongst many pension providers, about which AgeWage has considerable evidence, to provide data to enable transfers and to accept legitimate data and transfer requests from consumers. They argue that by offering their customers a poor service, they are providing the “necessary friction” to prevent self-harm. This is giving inefficient providers an excuse not to upgrade systems and adopt better technology. It is giving them reason not to participate in the pensions dashboard project and is counter to consumer interests.
- Finally we would like to address the question of consumer confusion resulting from multiple dashboards. This same argument was being made prior to auto-enrolment when it was thought that only Nest should be able to participate in AE. This turned out to be a false alarm, competition has and will continue to improve value for money from workplace pensions. Nest competes with a variety of providers because the Government resisted calls, not least from within Government to grant Nest a monopoly. Consumers have not been confused and the system is working well.
8, It is often thought by those who are in the public sector that the private sector is predatory and trending to bad practice or worse. When the worst recent case of pension scamming occurred in Port Talbot and other British Steel towns it was private sector advisers who were on hand to give immediate support to those who had been scammed and the public sector regulators who were absent. Latterly, history has been re-written. There is a strong moral backbone to many financial advisers and to organisations like my own who often go where others regulators fear to tred. We should recognise a lesson from British Steel is that where good quality information and guidance is not readily available on transfers, poor quality information will be given much greater credence.