Pension dashboards will be secure digital interfaces that allow consumers to find their pensions and to view basic information about them. Pension dashboard services will also help reconnect savers with lost pots, benefitting both individuals and the pensions industry. (CP22/25: Proposed regulatory framework for pensions dashboard service firms | FCA)
The FCA has published its proposals for regulating the pension dashboard providers and how they monetise these dashboards. This is a significant document which follows a day after it published rules on broadening advice and guidance on mainstream investments.
It is sensible to read both documents as they inform on each other and together show how the FCA envisage how most people will take choices on their pension savings going forwards.
The current situation is deeply unsatisfactory, the Pensions Policy
Institute (PPI) estimated that just under two thirds (62%) of UK adults have multiple
pensions. Among that 62%, 21% (more than 6.6 million people) know they have at
least one ‘lost’ pension pot. A ‘lost’ pension pot is one which a consumer knows exists
but for which they no longer receive communications from the provider. In October
2022, the PPI estimated there are more than 2.8 million lost pension pots in the UK.
People clearly know that they don’t know but don’t know what to do about it. 30% of savers don’t know what they own, can’t remember getting a recent pension statement and a further 12% of us admit to not reading the statements we get. The hope is that by putting this information on a screen and combining statements in a clear way, people will become more aware – seek help where help is needed and make sensible decisions about how to build and spend their retirement savings.
The FCA sees itself measuring success in terms of providers complying with the rules for operating dashboards and users showing discernible improvement in the management of their retirement affairs.
Concurrent to the introduction of pension dashboards, the FCA wants to make it easier and cheaper for savers to get advice and guidance on what they have bought and what they can do with it. This is the point of CP22/4
The FCA expects to see an increase in the proportion of consumers with large amounts of excess cash having the confidence to invest these savings for better longer‑term returns, resulting from them
- Reducing the level of qualification needed to provide advice on mainstream
products to clients with straightforward needs.
- Limiting the range of products available within the regime.
- New guidance clarifying suitability obligations so that firms have confidence on the
minimum level of information expected for the fact find.
- This aims to reduce the time needed for the fact finding and resolve some of firms’ liability concerns.
The FCA expect that these changes, along with the Consumer Duty, should mean core
investment advice can be offered to consumers at a lower price point than holistic
In an excellent article on the FCA’s proposals, David Tiller of Quilter applauds the FCA’s intent
The problem lies in that when asked, most people agree that saving for retirement or ensuring you and your family are protected are sensible ideas, but the reality is most people don’t act until they are faced with someone laying it out in black and white. A simplified advice regime would help shine a light on those areas of financial planning people often put to the back of their minds not just their savings and investments.
Giving the nation better access to the value we know we can provide should be the next steps of this proposal. What’s been tabled will help to ease the nation’s cash obsession, but our financial problems run deeper than just that and while full-service holistic financial advice for all is not the answer, having access to a simplified and cost-effective financial advice regime could dramatically change the financial resilience of the country.
Suitable recommendations, made without fear of litigation can be easiest achieved with the information collected and collated by a pension dashboard.
I cannot see the public paying for guidance and advice without being prompted to do so by a dashboard and I don’t see a dashboard working unless it gives access to guidance and advice. The two initiatives should work with each other