Demise of the pension dashboard
20 August 2018
This article was featured in the September 2018 issue of the magazine.
Henry Tapper, director of First Actuarial, provides an update on developments and wonders if the dashboard is already obsolete
You may know that Esther McVey, the work and pensions secretary at the Department for Work and Pensions (DWP), has been anything but enthusiastic about her department’s commitment to produce a pension dashboard by 2019. The government first proposed it could help in 2016, and the Treasury wanted to do no more than facilitate access for the private sector.
The vision of one great big dashboard came from the Association of British Insurers, for which a single data display meant more control and less work. Unfortunately, it now appears that the unintended consequence of centralisation has been bureaucratic paralysis. Though the timetable for the DWP’s feasibility was originally March 2019, McVey’s comments were in mid-July – with no report in sight.
The concept of the ‘dashboard’ harks back to the instrument panels on our cars, but many of us no longer have cars. Many who will need dashboards may never use a computer screen again. The optimal screen for a dashboard is quite different from what was being planned earlier in the decade. Now we manage our accounts, pay our tax and check our payslips on our phones – and those who manage our user experiences know that how we navigate information is changing.
In 2011, research by the DWP indicated that UK employees have on average eleven jobs in their careers, with a quarter of workers working for more than fourteen employers. The DWP estimates that if we carry on the way we’re going, by 2050 we’ll have fifty million abandoned pots – ‘abandoned’ being pots into which no further money will be paid.
Pension experts rightly argue that if we can’t have a way of aggregating the various pots we’ve built up, we will have difficulty managing them into a spendable format. With auto-enrolment now offering us a new pot each time we change jobs, the problem of a fractured pension experience is set to get worse.
If the DWP is looking for a long-term alternative to a dashboard, they might look to the workplace pension providers and payroll. While they may not be perfect, the workplace pensions that will survive the new legislation being introduced this autumn will be among the most efficient defined contribution retirement savings schemes in the world.
Unsurprisingly, those who run these pensions are looking to build lifetime customers and are beginning to lobby for a pension-follows-worker system where payroll clears contributions to a variety of providers at the instruction of the member. This is the ‘hub’ system in operation in Australia and technology providers such as pensionsync are expressing interest in acting as clearing houses for payroll. There’s considerable support for this approach from organisations as varied as Hargreaves Lansdown and Share Action.
...where payroll clears contributions to a variety of providers...
But while such a system may be a break to future pot-proliferation, it cannot deal with the legacy of the past. While the pension experts continue to argue for the merits of engagement, created by the aggregated view of a dashboard, the DWP don’t seem so sure. Speaking at a recent conference, Charlotte Clark, the DWP’s head of pensions strategy told a surprised audience she no longer believed engagement was enough.
Clark’s background is in the Treasury and she’s a pragmatist. That department has long been an advocate of ‘enlightened self-interest’ – a philosophy that translates into ‘what’s in it for us?’. A centralised pensions dashboard run by the DWP has all the hallmarks of a ‘vanity project’ for those in the Treasury smarting from the prospect of the DWP’s NEST loan reaching £1.2bn.
By comparison, the private sector sees the prospect of aggregating small pots with considerable self-interest. Procurement fees paid from the marketing budgets of providers of workplace pensions and self-invested personal pensions need not be massive for those running commercial aggregation services to make a decent living. This is supposing they can give people a clear view of what they’ve got and what’s available to them,
The obvious candidates to run private sector dashboards are the comparison websites. It’s easy to see how they could replicate the success they’ve had with individual savings accounts, life insurance and mortgages. Almost 25 million people gave their data to MoneySupermarket last year, dwarfing the numbers who sought formal financial advice (only 6% of the working population according to the Financial Conduct Authority).
Could these masters of digital technology do for our pensions legacy, what payroll can do for the future?
My conclusion is that the reluctance of the DWP to get on with building a centralised dashboard is for three reasons: firstly, they see the dashboard as originally conceived as conceptually obsolescent; secondly, they are falling out of love with the doctrine of engagement; and thirdly, they are being told by those in the private sector that the job can better be done by those driven by ‘enlightened self-interest’.