Don’t get pensions dash-bored – it’s coming
A one-stop shop where UK pension savers can view all of their pensions in one place sounds great. Even better if that information helps savers understand their retirement options and better navigate their financial future. But a pensions dashboard in the UK has been a long time coming, with the most recent timeline adding a few more years to the dashboard’s journey.
The legal framework for dashboards is coming in the Pensions Bill (expected to become law in early 2021). And following the implementation of Open Banking, giving consumers more control and visibility over their finances, fresh calls have been made for dashboards to come online. Now then seems a good time to check in on where the project has gotten to, and what a dashboard might look like once we turn the key.
Where are we now?
The Pensions Dashboards Programme (PDP) published a comprehensive Progress Update Report today.
So far, it seems that slow and steady progress is being made. However the current stumbling block continues to be data. And there are some pertinent questions being raised – how would a dashboard get the volume of data required to be meaningful for consumers, and how could consumers rely on the data shown on the dashboard?
The participation question should be helped by the Pension Schemes Bill which will compel schemes to provide data, rather than relying on early-adopters to volunteer. Even still, the PDP doesn’t expect to compel schemes to engage with dashboards until 2023 or later.
The PDP consulted the industry over summer on data standards and should be able to publish data standards later this year, so schemes will know what work they have to do to prepare their data. But don’t let that stop you from getting your data in order now. The timeframes for cleaning and providing data won’t be as long as you might think, so trustees and scheme administrators should be investing in their data now. We’ve suggested in a DC Hot Topic what steps you could take at the outset.
Over summer, the PDP also reached out to potential providers of the digital architecture for dashboards. This has helped the PDP define what would be needed from dashboard providers and develop its commercial strategy, with more information on this process due to be published soon.
Where are we going?
Dashboards are likely to be simple to start with, but no doubt these will evolve quickly so consumers can understand where they are on their retirement journey, see how quickly they are progressing towards their goals and react to any warning lights before they break down.
Initial dashboards likely won’t offer estimated retirement incomes – according to the PDP that’s an “incredibly thorny issue”. But those would be a helpful next step to show savers what income they might receive in retirement, and we know that the PDP wants dashboards to be “user-centric”, having recently established a working group to help make dashboards engaging and helpful for consumers. How accurate that will be, and what weight savers will give to it, is up for debate, but being able to see the combined income available from a state pension plus DB and DC pots will help cut through the difficulties of consumers totting up each and working it out for themselves.
Beyond that, dashboards will become more sophisticated as commercial providers come to market. Particularly so if the FCA goes ahead with plans to extend Open Banking principles to the wider financial services industry. We would expect options to transfer pensions between schemes and consolidate small pots, comparisons on funds as well as costs and charges, and offering other types of retirement products.