In an industry often criticised for its reluctance to embrace technology, the decision by a group of large providers to create a pensions dashboard is an admission that digitalisation is no longer negotiable. Digitally savvy consumers, comfortable using technology in their everyday lives, are demanding more from financial services, but the fragmented nature of pension pots means the industry all too often comes up short in its solutions. Equally, with pensions hitting the headlines for the wrong reasons, from the BHS pension fall out to collapsing sterling and low interest rates and their impact on pension funds, trust in the industry is once again wavering.
If it is to remain relevant, the industry must make it easier for savers to take control of their financial destinies, particularly as traditional funds see growing competition from savings vehicles such as ISAs. At a make or break time for pensions, the dashboard presents a once in a generation opportunity to revitalise the industry.
Failure is simply not an option: we cannot afford to squander this chance.
But the route to a dashboard that works for all is littered with obstacles. As things stand, the providers, which include big hitters such as Royal London and Zurich, together with the Association of British Insurers (ABI), aim to have a prototype in place by March 2017, before it going live by 2019. We need to remember that whilst those involved are major providers, the success of the dashboard will be judged on getting a full sweep of support for the project in 2019.
The ABI is going to have to work hard to ensure that all of the groups involved in the scheme are pulling in the same direction. A clear vision and careful planning will be key and no decisions at any stage of the project should be taken without a thorough consultation with those who matter most: savers. Unless their views are at the heart of the process, the whole project may as well be consigned to the scrapheap.
Despite its good intentions, the industry will not find this easy. Decades of navel gazing and dancing to its own tune mean that customers’ needs are too often overlooked. Understanding technology – and how customers use it – has the potential to free many from the constraints of an often turgid industry. It is crucial that the industry capitalises on this.
Another threat to the dashboard’s success is that, as things stand today, there is no guarantee that the state pension will be included, even though, for many, this will make up a huge proportion of their retirement income. In order for savers to receive a complete picture of their retirement funds, this clearly needs to be built into any dashboard the industry develops.
There are also concerns that the very concept of a pensions dashboard is limiting – even backward-looking. While a traditional pension will provide the lion’s share of retirement savings for those with a defined benefit pension, the reality is that for many others, income in retirement will be funded from a variety of different sources. Auto-enrolment, despite its commendable aims of getting people saving through inertia, is unlikely to make up a significant enough proportion for many. Instead, ISAs, in their many incarnations, have proved popular amongst younger and middle income savers and will feature increasingly heavily in any investment portfolio. But if the dashboard can’t guarantee these ‘next generation’ products in its remit, questions will (and must) be raised about its fitness for purpose.
The dashboard will certainly be one to watch as it comes to fruition and technology will be pivotal in ensuring its overall success. But make no mistake, if the industry fails to get fully behind it, and the technology underpinning it, pensions could find themselves in the history books within a generation.