This is 56 minute video. This is the Quietroom account of my friend Richard Smith speaking at its seminar yesterday morning. You can read Quietroom’s account  by following this link., there is no need for doing this again,

What follows are my thoughts , following a discussion with the speaker last Saturday.

Smith’s argument was based on his 0wn experience , being granted a pension when his wife died of cancer when they were both young  (he was only 46). He will not see the pension on his dashboard as he knows about it every month he gets a payment into his bank account.

This experience is the basis of his belief that pension dashboards will change the way people feel about their retirement income. He brought to mind a recent radio interview

Michael Morpurgo said on the radio

“you have to feel something properly , before you communicate it honestly” .

Smith’s experience to date of pensions has been as an income and he lobbied for the expression of pensions on the pension dashboard as an income.

He emphasised that the first thing people will encounter after getting authorised to get their data (Government Gateway) is their entitlement to their state pension.

He inspired me to get access to my state pension forecast, here it is..

It gets me a sense of reality and next month I will get a pension projection where I will get more than £1,000 per month.

Smith could not show any more than a fanciful display of his Private Pension Dashboard, one that he hopes one day will be produced by his former client Money Hub, but he showed it anyway.

Richard is showing his state pension (from next month) , the amount he is yet to pick up as pension from defined benefits (weirdly some of this is from the PPF and won’t be shown immediately on the MaPS dashboard) and the majority of his income will come from DC savings converted into pensions according to formulas laid down the  Financial Reporting Council (FRC).

Unfortunately, most people’s income from private pensions will be less than Richard’s or mine, which is why FT adviser reported on a recent PASA event, where Richard was again presenting, as showing the paucity of pensions.

This is because people are not being presented with their pension in terms of its value as a pot but as an annual non-increasing pension paid on a single life basis.

In his contribution to the IFS discussion on income from our pension pots, Paul Todd (COO of Nest)  made a very interesting observation about how it was likely to go for the 13m Nest savers who have – so far – done what Nest’s defaults have told them to do.

Todd suggested that the income from people’s pot would be paid as pension with income being secure and solid at its outset and that the outset income would increase depending on the growth in the value of Nest’s overall fund. In short that the fund would pay what it could afford to pay as extra annual income (pay).

This I hope will be an experience 13m Nest savers will have, that those with Nest pensions will get the benefit of growth on their fund, but it depends on two things

1. That Nest declare an initial pension rate with the potential to see increases in pensions to match inflation
2. That the Nest pension is not a level annuity as implied by the dashboard’s illustration and that there is a possibility that indexation is not possible because it is dependent on investment.

I asked the question of Richard as to whether the illustrations were really comparable to the state pension  (with its triple lock – which people understand). I mentioned that Nest planned to pay the investment growth as pension increases and that consequently the figure quoted as a single not increasing pension from a DC pot would need a lot of explaining to people used to talk of the state pension. Richard accepted the inadequacy of the figure he had shown for himself and the ones that followed from Money Helper’s bar chart of estimated income

The truth is that we are only beginning to explain DC saving as “pensions”. We do not have what has happened abroad, a culture that thinks of pensions as retirement income. Like Australia, we are dazzled by the wealth of our pots.

This is the key slide for Richard Smith, telling him what he is likely to get when he packs it in.

The work done by Money Hug has shown that easily the most emotive response to being shown a pension dashboard that enabled to work out how much more they needed to save to get to an income they felt “enough” or “adequate”

We cannot do proper thinking about income in retirement till we understand what we will need when we stop working and in the decades to come (most people will live 30 years when they get to 55).

“Dashboards don’t make pensions more exciting , just more accessible”

The session ended with a short question session. I have tried to capture what was asked to encourage more thinking

Questions

• Are we over-encouraging people by explaining things in terms of non-increasing pensions?
• People think about Nest in terms of the increase in pensions that it gives – from triple-lock to no increases is quite a lot for people to take onboard?
• How do we talk with people about the real value of their pension without discouraging them?
• People are concerned about state pensions and workplace pensions and their differences. How do we test the emotional impact of seeing everything in one place?

The achievement of Richard Smith’s session was evident in the questions asked. People were asking about the nature of the pension they were being promised and recognising that the dashboard will be the start of a long journey for many people.