A single-source pensions dashboard would be bad for competition and innovation says Ian McKenna Director, F&TRC
The Government needs to set out mandatory data transfer standards and then leave it to the private sector to build pensions dashboards
Few initiatives have more potential to improve consumers’ understanding of their retirement savings than the pensions dashboard project.
If implemented correctly, it can deliver enormous benefits. But I am increasingly concerned at suggestions that there is no role for advisers or EBCs in delivering these services.
More and more benefits advisers are building powerful solutions to significantly grow financial capability and knowledge among pension scheme members. Aon’s Bigblue and Mercer’s Harmonise both include extensive financial education content. This, combined with powerful tools aggregating data from a range of sources, can supply a detailed, personalised analysis of the individual’s financial affairs. In turn, this can nudge members to make better financial decisions.
Software providers like Intelliflo and MoneyHub are making similar aggregation services affordable for adviser businesses that have not created such services in-house. These deliver exactly the sort of service the pensions dashboard concept aims to achieve. If the dashboard project is to facilitate easy, free digital access to details of a consumer’s entire long-term savings needs, this is to be welcomed.
In some quarters, however, it is being suggested that there should perhaps be only one pensions dashboard. This would be a regressive move that would undermine the ability to make information freely available to consumers.
If a single source is a commercial entity, isn’t that anti-competitive? Alternatively, if it is government funded, isn’t that illegal state aid? Growing numbers of organisations are delivering consumer services that can provide this information from established life and pension providers. Any pension provider that wants to make this information available can now do so at minimal cost.
While some may argue that delivering a pensions dashboard should be the responsibility of the MAS, this could have a detrimental effect on private equity funding for start-ups looking to deliver similar services. If the Government promotes a competing service, it would greatly discourage private investment. The Treasury and senior ministers have stressed a determination to make UK FinTech a world leader in innovation. Just a few weeks ago the FCA held an event dedicated to this agenda.
It is vital not to undermine this objective.
To achieve the best consumer outcomes, the pensions dashboard initiative should focus on ensuring that the widest community of pension and long-term saving providers is placed under a legal obligation to make available all the information needed for a consumer to compare their pension, in a format that can be consumed digitally. This must include all public-sector and DB schemes plus other packaged financial products.
The Government has already achieved exactly this in the banking industry via the Enterprise and Regulatory Reform Act 2013. This has resulted in the current account switching service. Extending the legislation to impose the same obligation on all public- and private-sector pension providers needs only the introduction of a statutory instrument.
Some schemes will claim this would place too big a burden on them, and their systems are too complex to support it. I gather banks said something similar but, when facing the prospect of weighty fines for failing to make such information available, suddenly they made it possible. Every major UK bank supports the current account switching service. Shouldn’t all pension providers have to do the same?
I expect pensions dashboards, or ideally savings dashboards, to become the starting point from which individuals focus on their medium- and long-term savings. They will be where consumers start their journey for financial education, guidance or advice. To restrict the delivery of dashboards to a single source or to give any type of pension provider an exemption would gravely undermine the benefit to consumers, freedom of choice and the efficiency of the market.
Self-interested quangos and protectionist scheme administrators must not be allowed to derail this important initiative. Everyone involved in pension advice should make it clear to the Government that the pensions dashboard must be an open service, including all long-term savings products.