How we like to portray our pension administration.

I was really pleased to hear from people I like and respect over a blog I published on a Saturday (which could have been ignored). What I was saying was that the urgency with which people are engaging with their tax affairs in advance of the coming budget is putting pressure on pension administrators and exposing weaknesses in the claims facilities of our major workplace pensions. It would seem that they are rather better at taking out money than giving it back.

Our capacity to access our pensions as we have been promised is key to our confidence in the system, Owning units in a managed fund or a right to a cash sum from a defined benefit fund is of only theoretical value. Knowing that money could be in your bank account within 24 hours (or 24 seconds if we are banking digitally) is critical to confidence in the system. We just don’t have that confidence, For all the talk of online portals , there is no button that says “send money”. Instead there is a long process that includes sending paper with wet signatures confirming identity, tax affairs and such-like. I see no attempt to set up digital passports , such as the Government ID I use for self-assessment. The priority given to paying claims is low. #

Here is Jonathan Hawkins, who along with Richard Smith has become a guru on digital interfaces that will culminate in our getting pension dashboards, hopefully in two years time.

Henry Tapper gives an account of his experience in taking (and not taking) retirement income. The following quote is so true – and it really needs tackling. Thanks for a proper “war story” Henry. I also fear dashboards will drive similar or greater influx of enquiries that can’t be dealt with quickly or automatically.

“Penson companies that operate on antique systems with “lipstick on the pig” front ends, are getting found out and I expect many will fall short on the quality of service metric for value for money as a result. Chronic lack of investment in the member experience and in particular “at retirement decumulation” options, is catching up with them.”

When will the trustees/execs be made to update their full stacks? Members deserve more, better automatic protections, and straight through automated processes. Pensions aren’t “special” and don’t require any more business logic or magic than other companies working online – we just need to invest properly in the right tech and bin the many 1990s admin models. In most cases that drive is not going to come from within.

Of course we have been let down in the development of dashboards. All of us defer to Richard Smith and I cherish Richard’s comment on my Christmas 2022 post looking forward to having a dashboard by this Christmas

That comment was against an article entitled “fears for dashboards as complexities cast doubt over a 2023 launch”

Financial inclusion

Sadly there will be no dashboard this Christmas and I suspect that many people will continue to experience frustration that not only do they not “own” their pension pot, but they can’t even find it (or them).

Many I know who are happy to discuss small pots as a nuisance , sign up to the theory of sidecar savings so that people can have £1,000 in an accessible savings account to pay for burst boilers or a new set of tyres for the car.

They should recognise that the small pot of a few hundred pounds could and should be that savings account.

Next to where I live is an underpass that connects Lower Thames Street from the Embankment to the City. By  the service road beside that street is a row of tents where homeless people, many of whom work in the City, live.

Homeless persons tents pitched in line on the pavement in an underpass near Blackfriars in the City of London on 8th April 2024 in London, United Kingdom. (photo by Mike Kemp/In Pictures via Getty Images)

It is a tented community and I’ve started talking with those who work and those who don’t about their finances. One man is over 55 and knows he has a pension pot, he has a mobile phone, we are trying to find it. If he could find that pot , he might not have to live in a tent on the pavement.

This is an extreme example of a problem that besets many poor people , people who have saved and have fallen on hard times. The lack of urgency in giving these people a means to find their pension and the difficulties this man would have claiming his pension show just how far we are from financial inclusion.

The promise of a dashboard does not absolve anything

I live an incredibly privilidged life. Once I’ve walked through the tunnel and past the tents, I get to my office near Cannon Street and there I talk with millionaires about funding Pension SuperHaven and backing occupational pension schemes to  run on. And at the end of many meetings, the bankers and hedge fund managers ask me what they should be doing about their pots and pensions. They are all scared about the budget and they have a  common anxiety that they have little or no control of their money.

Though they almost all know where their money is , they have to  rely on pension providers  to manage their affairs. Like me, they are complaining about getting money out

I worked for a pension provider and remember the “cost of claim” being a number we tried to minimise in our financial model. The idea , 25 years ago, was that within 10 years, people would be drawing money from their pensions from a hole in the wall. This can be done, but it requires modern systems which can interface with open banking. It requires proper ID verification and it needs pension schemes to start thinking not just about catching up, but thinking ahead. Pension schemes could and should be employing the technology of the distributive ledger – the blockchain. Instead we continue to discuss services levels that are frankly embarrassing.

As I read through the IGC reports of workplace pension providers, I realise that there is no benchmark for good service other than the median of the service we get. The Redington survey of quality of service, seems to allow the winners to publicise themselves and the losers to remain anonymous.  There is no challenge, no counterfactual to the received ideas and hence – very little progress

The reality of pension administration

I will spend some time next week in the exhibition hall of the PLSA Annual Conference 2024. I have been promised access to an array of AI tools and technological marvels that make me see my future self through the trickery of digital art.

But I will have a half an eye on the tented village in Blackfriars underpass where people sleep rough who have lost pension pots. I will have a thought for Edi Truell’s children who struggle to improve their pensions and Jnamdoc, running a pension scheme that has no dashboard to link to. This is not just about financial inclusion, it is about treating everyone fairly and it ill-behoves pension providers to boast about how they are adopting AI , when they can’t pay the right money, at the right time to the right people.