Steve Webb has urged the DWP to give pension funds a stronger steer on dashboard data. I suspect that he is worrying too much about the detail and missing the bigger picture, we really need to get on with the dashboard and we can learn a thing or two from the current vaccination program.
In this article I explain why we need to stop worrying about niceties and simply get on with the business of helping people find, value and use their pensions and pension pots, to fund their later lives.
Dashboard or disclaimer?
Steve points to uncertainties about people’s future entitlements to pensions, including guaranteed minimum pensions , some of which are under review because of a recent legal ruling on equalization. Uncertainty about pension entitlements is a hot topic for some BT pensioners, an old friend and client has received a message from the BT pension department telling him his pension will be reducing shortly because he has been overpaid in the past.
It’s important (especially when considering conditional benefits in CDC) to remember that defined benefits can and do go down in certain circumstances. My pension from a former employer reduces when my state pension arrives (as an example)
Despite the seeming certainty in the term “defined benefit”, the payment of a pension is dependent on a number of variables including the rate of inflation. So anything posted on a dashboard about future benefits will have to be qualified by a series of caveats. Give lawyers a chance and a dashboard will quickly turn into a disclaimer.
But it should not be hard to establish the assumptions for the projection of future pension benefits and it should not be hard for the administrators of Defined Benefit pensions to establish a simple statement of entitlement based on scheme rules which tells people what they can expect and when. All the rinky-dinks (such as my bridging pension) , should not stand in the way of a simple expression of entitlement.
Getting on with it
Steve’s comments are accompanied by some opinion from me along the lines of “let’s just get on with it”. We do now have a data standard for the dashboard and , assuming people have a few basic facts about them , they should be able to establish a digital ID for themselves that will trigger responses where a pension benefit is held by a pension administrator.
Whether that benefit is a pot or a pension, people should be able to see what they have coming , when it is arriving and who has the money to pay the promise. That is the minimum expectation for most people and the issue for the Pension Dashboard Program is how complete coverage needs to be.
We know from the vaccination program, that there are big wins in delivering quickly to those who need help most. Were we to judge vaccination as successful only when we had full coverage, then the millions of jabs going into people’s arms over the next few weeks , would be discounted. The current view of those considering the “Dashboard availability point” is to consider the roll out of the dashboard only when the data is fully available. That’s like keeping every vaccine in its box till there are enough boxes for everyone.
If we aren’t careful, we will allow the ongoing arguments about how to equalize GMPs to stand between people and their dashboard , which is utter madness!
We really do need to get on with it, learning that a “can do” attitude to the dashboard is preferable to a “let’s wait and see” approach.
Testing data accuracy
Although Steve is focusing on future pension benefits, the biggest worry amongst the pension administrators I speak to, is that the pension pots filled by contributions from the workplace and from private saving aren’t showing the correct amounts due to savers.
There is a quick and easy way of testing whether pot sizes make sense and that is by comparing the contributions recorded for the saver (from all sources) against the current value of the pot. Provided we know when the contributions were due, it is possible to check the return on the pot and sense check it against a common benchmark.
The only thing stopping this kind of testing happening is a fear of what it might reveal. However , ostrich like behavior from data controllers is unlikely to meet with much sympathy from the DWP who are now under serious pressure to get schemes dashboard ready.
I will be speaking with both the Pensions Regulator and the DWP about data testing in the next few weeks and hope that I can continue the conversation with the FCA, who have responsibility for the contract based pensions (both workplace and non-workplace).
Publish and be damned
The importance of getting dashboards into public circulation cannot be understated. The prospect of a pension dashboard showing people’s entitlements has caught the popular imagination, the genie is out the bottle.
The longer we wait for the dashboard to arrive, the greater the sense people will have, that we are hiding something, and people will be right.
We are , as an industry, frightened we may find ourselves exposed by the dashboard, but we should be worried more about there being no dashboard – and that is where we are heading unless we learn to keep things simple.