Many of us are now in defined contribution savings vehicles so we do not technically have pensions but rather we have retirement savings. Pensions in my mind are very different and are instead linked to buying an annuity. What most of us are looking at is growing a pot of money over our lifetime and then deciding what would be the best way to manage this when we stop or reduce our working pattern.
The Pensions Dashboard is going to be key in evolving society’s attitude to this way of saving and investing; it is hard to predict quite what reaction it is going to have from the general public.
What do we mean by Pensions Dashboard?
The Pensions Dashboard is a program that has been set up as an arm of the Money and Pensions Service. The government has legislated for all pension providers in the UK to provide data to these pensions’ dashboards, including both the government sponsored Money Pensions Service dashboard and other dashboards. These providers will need to securely communicate with both the central infrastructure of the dashboard program (the pensions finder service) and also the consent and authorisation tool (managing the consent and access to data). They will then be responsible for sending the details of someone’s pension over to the dashboard.
The individual can then go onto their Pensions Dashboard, key in data, the identity will be checked and then the technology will search and collect any pension pots that match their details. This is a very compelling service and something we have not had before in the pensions space.
It does not however come without both technical and data challenges. In the UK unlike in other counties, we do not have individual identification numbers that are held centrally. Even our National Insurance (NI) number is not validated or held on a central record that can be easily accessed. Providers will also frequently have the incorrect NI number against a client record. There is a lot of effort needed to make this work.
One of the big design challenges is that there is no specific database holding client data, instead there are identifiers to point towards particular providers. The dashboard would be authorised, ensuring the appropriate governance for the pension’s dashboard infrastructure.
What benefits would Pensions Dashboard bring to our industry?
Pensions Dashboards offer huge benefits for individuals by consolidating and simplifying the pensions process. In the future they could connect individuals to open finance, providing the ability to manage all assets together, rather than just the pension funds. By opening up the hidden world of pensions, technology could then be used to shop around for the best deals, keeping providers on their toes; or to support the investment process by using machine learning (or an AI tool) that could automatically switch people in or out of funds based on their specific criteria.
The Pensions Dashboard service would ultimately enable individuals to interact with their pensions savings and understand what they really mean. It would allow our industry to communicate better by reducing the complexity and the jargon frequently used. Most people simply want to understand what they are going to receive in retirement, and what they need to do to make this easier. This service brings these questions to the fore and could ultimately help encourage people to save more by simplifying the process and clearly highlighting the significant tax benefits inherent in retirement planning.
When does the Dashboard launch to market?
This is due to launch in 2023 and there is currently a full programme underway collating industry input for the finders and consent service.
At Bravura we are looking at how best to support our customers in this space through the provision of connection to the dashboard infrastructure and delivery of innovative solutions through our microservices and powerful Sonata registry system.
As an industry what more can we do to improve retirement outcomes?
The two key areas that are going to affect an investor’s retirement pot would be firstly to have an understanding of what they currently have, and secondly how they can impact the amount of what they will receive on retirement. As a general population, we do not have a clear grasp on either of these.
In addition, we communicate in a variety of different ways with our clients, often bamboozling them with information. A standardisation of general terms would therefore be helpful in reducing consumer confusion. We should also be looking to educate individuals to fully understand how to control the key mechanisms that impact their pension, whether that be the charges levied or fund performance.
As professionals we need to up our game as to how we talk to our customers. This is especially important when looking at the mass unadvised section of society. Systems can and will be a big part of this, but they need to be up to the job and be interesting, relevant and snappy. We are seeing technology come on leaps and bounds and as an industry we need to take full advantage of the innovation to help drive better customer outcomes.