I got a comment on dashboards from one of my regulars. She’s not a pension person, she’s a finance person
I’m sitting here working on scheme board papers as I’ve got two meetings this week and I’m looking at the money helper slides from their town hall on 2nd December (when you were still very much laid up).
Do you think it’s a bit worrying that what users will be told is that everything that’s been ‘found’ from using the dashboard is a ‘pension’, when some are (BSP and DBs) but many others (which are mixed in with the above ) are pots. It then goes on to say some will go up and down- my M&S DB only goes down at 65 because some of us still have a future clawback, but why generally would you say this about all pensions including the state pension?
Perhaps I’m worrying unnecessarily but I’d hate the dashboard to add to the confusion about pots v pensions after waiting so long for it to reunite folks with what is rightfully theirs.
Royal London’s Clare Moffat worries that the dashboard and that it will leave savers £12,000 pa behind where they want to be – £48,000 pa. The solution is to put more money into the DC pot using resourceful contribution enhancers.
I don’t know what world Scottish Life are talking to , but the world that I live in, the world I go to church to meet, the world that shops in Aldi and Lidl and the markets and not Waitrose, most people would consider a pot with £48,000 a bonanza.
And herein lies the problem, £48,000 might show as £2,500 pa on the dashboard if they aim to project lifetime income not “pot” and that is going to come as a heck of a disappointment to the people who think they are in line for a £48,000 pension.
The 4,000 people maybe “non-retired” and they may be shopping in Waitrose and have pots 20 times a £48k pot (or 20 x £36K if they find themselves underfunded. But the vast majority people in this country are going to find £960,000 to £720,000 in their pots – an unbelievable projection.
And that will be because they are getting 8% of band earnings going into their pension.
The things that are really valuable, the state pension now creeping towards £12k pa and their DB plan, if they work in public service or for those few non-Government organisations still keeping DB open.
Actually, my correspondent is absolutely right. What the pension dashboard is going to do is concert DC pots into corresponding incomes to what they’d get from DB and the pot will stand behind. That’s going to be a horrid moment for a lot of people who will have to think about DC pots as pensions for life.
I clicked through to Chris Curry’s update
My worry is that the commercial sector will continue to sell pots as pensions and that the confusion my correspondent is having will continue. By the way, I really don’t know what I will see when I get to use my dashboard and I have many of the same issues coming up (when I get to 65) on my DB pension.
Richard Smith
Richard has responded when I shared my friend’s concern
Richard is pointing us to the use age of commercial relative to the state version by Norwegians. I suspect that commercial pots will sell us what we want to see and like today’s consumers , we will be comforted by pot sizes and not think about pensions very much (until too late).
Lets be honest the Pensions Dashboard is designed to be a marketing tool for the DC providers trying to secure their income from transfer values in large lump sum payments than the insecure drip feed of regular contributions!
Once again it is encouraging the comparison of apples and pears with the secured income flow from DB and State Pension put alongside the anything but secure outcome from a DC arrangement.
It is encouraging consolidation, but with DB pensions consolidation is probably not in the Member’s interests, after all it is ultimately the employer who bears the administration costs and takes the investment risks.
Even worse the perceived advantage of having a large pension pot is likely to encourage many to seek to forego later life income protected against inflation.
I can’t easily find much about just what the Pensions Dashboard will cover, but I think it was initially only going to cover uncrystallised pensions. This could produce some interesting results. A DC pot from which all the tax-free cash had been taken wouldn’t then show at all.
Pots in phased drawdown would only show the uncrystallised portion of them. There are quite a lot of people who are in phased drawdown without knowing about it. They have asked their provider/financial adviser for some tax-free money from their pot. They haven’t understood, or their provider/financial adviser has explained, the mechanism used to achieve this.
£48,000 at the start and with inflation at 3% (20 year average)
rising the £100,000 after 25 years.
So you have identified a figure when the individual can retire rather than an arbitrary age. More required if a second life needs to be considered.