Some people believe that the Pensions dashboard is a silver bullet for increasing member engagement in the UK. The government community is very excited and some even think that the dashboard will solve adequacy. I don’t share this enthusiasm, mainly because I already have access to the Swedish and the Dutch versions of the pensions dashboard on my mobile phone.
I sympathise with Chris Curry and the team working on the dashboard. This is not an easy technical problem to solve, and the unrealistically high political expectations of what the pension dashboard should deliver, in terms of engagement, might lead to disappointment down the road.
In the Nordics and the Netherlands, everyone has a unique individual identification number. This number is used when dealing with the government, healthcare, finance, etc. Having a unique identifier is a necessary condition for digitalisation of public and private services. Introducing a unique national identification number in the UK would make it easy to collect data from different pension providers and to create a national digital identification app.
With most digital services, the main hurdle is to register and login. If registration is tedious, most of us tend to give up. Remembering your password is another large hurdle, especially for services that one doesn’t use regularly. The pension dashboards in Sweden and the Netherlands use the national digital identification app. There is no need to register separately, or create a specific password, just visit the website and login with your existing digital identification app.
It might sound trivial, but this reduces the largest mental hurdle for using the pensions dashboard. A few weeks ago, I spoke with someone from an Icelandic pension fund that has been digital for almost 20 years. The person said that the usage of their digital journey increased dramatically when Iceland introduced a national digital identification app. And so, in my opinion, any minister in the UK that is vaguely interested in growth, should push for a unique national identifier as a key component of the national digital infrastructure.
My personal experience with pension dashboards
Since I am working in the industry, I am not the most representative user of a pensions dashboard. I have access to the Dutch dashboard (www.mijnpensioenoversicht.nl) and the Swedish one (www.minpension.se). For the purpose of testing them, I used my smartphone.
The Dutch dashboard is available in both Dutch and English. It gathers all information after the login, so it takes a short moment before I have my personal information. The advantage is that my data is up to date and there is no central database. I get a projected life-long annual net income (after tax) based on my current contributions and state pension age. It illustrates how much of my net income would come from my state pension and my workplace pension. But it is not clear if my projected pension amount is expressed in today’s money value. Moving beyond what is presented on the landing ‘page’ is a bit cluttery on the smartphone. There are tools to help me understand what happens to my pension in case my life situation changes. I can download a pension overview and use that in a conversation with an advisor. My prediction is that few users will go beyond the first page unless they have experienced some changes in their private life.
The Swedish dashboard is similar, and data is gathered after login. In Sweden, there is more flexibility around withdrawing pensions. Some of my pension savings are paid out over a fixed period, and others are lifelong. The amounts are shown as projected income before tax, at different ages during my retirement. When clicking on a specific year the overall projection is decomposed into state pensions, workplace pensions and private pensions. Similar to the Dutch version, it is unclear if the projection is in today’s money value or not. There are tools that will help me analyse the consequences of changes to my life situation, and after age 54 a planner is available to help me customise my withdrawal profile. But it’s quite tedious. Again, I don’t expect most to go beyond the landing page.
Interesting observations from Sweden
In Sweden, screen scraping is not allowed as a way to collect data, but there are emerging standards for accessing data that have been developed by the industry. BankID is used for digital authentication and Fulmaktskollen is a digital hub holding power of authorities. The Swedish dashboard has been developed in collaboration with the pension industry and it was deliberately designed not to compete with the commercial guidance/advice provided by the industry. Some friends have a small fintech start-up and they are into the weeds of collecting data from all Swedish providers. Based on that, they offer regulated advice. Compared to the dashboard, they can gather more detailed information on the terms and conditions for each individual pension contract which includes, for example, information about charges, investments, beneficiaries and other life insurance elements.
Sweden recently changed the law so that transfer rights for all pension contracts apply retroactively. In short, that means that all deferred savers are up for grabs. I asked my friends if they think that this would increase the use of the pensions dashboard and boost engagement. They argued that people are not looking at the dashboard more than before. The pension transfer market is mainly driven by brokers, not the individual. The broker has a physical meeting with the individual. In that meeting, the individual logs into the pensions dashboard, and together with the broker, all pension providers are identified. The broker then helps the individual to set up the somewhat complicated transfer process into the product recommended by the broker.
What do I expect for the UK?
My expectation is that the pensions dashboard will provide a good overview of what the individual has. Based on my experience with Swedish and Dutch dashboards, I don’t think that the pensions dashboard will drive engagement or address the adequacy problem. The Nordics have not achieved that, and they have a much better technical starting point. The hopes and fears of what the pensions dashboard will achieve is clearly overstated. Looking back ten years from now, my prediction is that we will conclude that the main achievement of the pensions dashboard project was the development of a standard for ‘open pensions’.
I expect the dashboard, or more precisely its standard for ‘open pensions’, will drive consolidation in the UK. Most workplace pension providers currently ask new, and existing, members to consolidate their pensions but it is a somewhat tedious process for the member. The ‘open pensions’ standard removes the necessary detective work for finding all their past pensions. This will open up the market and increase competition which benefits members. But it requires thoughtful regulation to protect the end consumer since, without the necessary checks and balances, my experience says that there could be misselling problems down the road.
This doesn’t really touch on the increasing problem of people having pensions in more than one country, nor on proving your identity on a system in a country that you have permanently left.