How can regulators facilitate innovation?

This is the seventh of a series of ten blogs giving my response to the FCA and TPR’s call for input on the pensions consumer journey. In the previous blog in this series, I pointed to the differences between people’s ability to see and affect their credit score and the capacity people have to see and influence the outcomes of their retirement savings. The principal ways that people can improve their financial lot in later life is by saving more, managing existing pots and effectively turning assets into retirement income ( a nod here to equity release which may be available and necessary).

The bar for pensions is set very low, yesterday’s report from the Pensions Dashboard Program on the timeline for delivery of the dashboard suggests that pension pots are considered rather more fragile than bank accounts.

So the questions being posed in this call for input need to answered in the context of an industry for whom concepts such as “innovation “, “techsprints” and “engagement tools” are viewed with a degree of distrust.

What lessons from other industries could the pensions market use to drive the use of technology as an engagement tool and what would stakeholders find useful for regulators to do to facilitate innovation, for example creating a panel or additional TechSprints?

Let me give an example the Experian credit score which people have come to realise is manipulable. People can improve their credit score by good behaviour. We are able to understand what makes us a good credit risk by seeing the impact of quite small changes like paying bills on time and experience the regret that comes from seeing the score fall when things go wrong. People are dependent on their score for lifestyle choices such as whether to rent or buy and they enjoy seeing the transparency of financial underwriting in the palm of their hand. Nothing like the credit score exists for pensions.

Instead we have created choices for people reaching the point where they need to consider what to do with their pension pots with no consolidated savings score but with complex choices about later life finances called investment pathways. The failure of the pension industry to work with Government to create open pensions means that people still have to make data requests which are satisfied by letters in an envelope or data in a PDF which cannot be readily downloadable into a spreadsheet.

Faced with the difficulty of tracking and tracing multiple pension pots , finding their value , establishing how each has done and determining next steps is well beyond the resources of most ordinary people – as is the employment of an adviser to create the kind of pension dashboard they need to make decisions.

Further to this, the technology which the Government is providing to help people make choice on investment pathways is manifestly unfit for purpose as it provides no assessment of the value available from the pathways and focusses entirely on the money that each pathway will consume (if followed).

Having been to and through the FCA’s innovation sandbox with AgeWage, I can see clear advantage in using the skills the FCA has collected in its testing to get further innovation in pensions.

This imbalance between pensions and credit is just one example where pensions lags in the open finance initiative. The FCA and tPR should not be asking for pension people to techsprint with other pension people, they should be asking that they sit with fintechs working with live data sourced through APIs and learn how pensions can share data in real time so people can see data on dashboards and make financial decisions based on a more complex decision than the cost of the service on offer.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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