Anders Lundström, the chief executive of MinPension.se — the Swedish pensions dashboard — has first hand experience of the challenges ahead for the UK, as it develops its own dashboard initiative.
Although the government has now legislated for pensions dashboards, and a working group is in place to oversee delivery, he warns it is unlikely to be plain sailing ahead.
“Building a pension dashboard in Sweden has been a long, painful and complex process,” he says. Technology may have has advanced significantly since Sweden embarked on this process, more than two decades ago, but the UK will still face many of the same monumental challenges he says. This includes dealing with a whole range of legacy pension systems, ensuring data is accurate, consistent and of a high quality, particularly across different DC and DB systems, incorporating private and state pension data, and making sure the public can understand and engage with all this information effectively.
The Netherlands, Norway, Denmark and Belgium also all offer their citizens some form of pension dashboard, enabling them to get retirement projections based on up-to-date information on their state, occupational and private pensions. But Sweden has been at the forefront of these technological developments.
Lundström points out that plans for a dashboard started in the late 1990s, in response to a fragmented and confusing pension system, which bears a number of similarities with the UK’s pension system.
“We had a big reform of the state pension and many occupational schemes were moving from DB to DC arrangements. People could choose where to invest their private pension, but there were more than 800 different funds to invest in. This was a fragmented system and there was a lot of confusion about pensions. Most people had no idea what their future retirement income might be.” On top of this he points out there was a complicated pension taxation system.
Min Pension i Sverige AB was set up as a company in 2003, with Lundström joining as its first employee in 2004 — he has been at the helm ever since.
The first iteration of the dashboard MinPension.se was launched later that year, although Lundström cheerfully admits that it was very limited in terms of coverage and was effectively completely scrapped a couple of years later, with a newer version launched in 2007.
Initially the site did not contain details of private pension provision, and had around 50 per cent occupational coverage and 60 per cent of state entitlement.
There are lessons the UK can learn from this somewhat bumpy start he says: “Something is better than nothing”, and adds that it is important to not let the perfect be the enemy of the good.
Initially he says the dashboard struggled with data collection, particularly across the different parts of the pension system. Swedish citizens, like those in UK, have a significant number of pension plans, so there were questions as to how useful the dashboard would be if they could only see part of their total pension entitlement.
Much of the work in these early days was on standardising and improving the quality of data received from the industry. Most providers had different information standards, he says, so part of MinPension’s role was to “clean up” this information, to ensure it could be used in their dashboard.
Lundström says this early version, despite its limitations, gave them a working site to develop and improve. “It’s a steep learning curve. You need a small working team to get it off the ground, and you have to be prepared to change and rebuild things as you go along.”
MinPension was set up as a public-private partnership – with a board that includes representatives from both the Swedish Pension Agency and National Government Employee Pensions Board alongside those working in the private insurance sector. Lundström says its primary role was to provide information through its website.
This collaboration, between the state and privately-funded companies has been a key part of its success, Lundström says. “There had to be co-operation. It was important to foster an open discussion with no hidden agendas to understand each other’s point of view, and where their interests lay. From doing this we could set up some common goals that we could achieve.”
This he says has involved a number of compromises, and there are still remain issues from time to time, particularly when it comes to matters such as policy transfers and data sharing.
Private companies, he says, need to protect their own commercial interests and this has to be understood by those building and designing dashboard capability.
Initially, he says there was a tendency for some players to delay the process, and drag their feet on supplying data and information — perhaps on the fear that their customer base could be targeted
by competitors if information became more transparent.
It was important to address these issues upfront, he says to ensure the dashboard development helped the commercial interests of these private companies too.
“This has been one of the critical success factors,” he says. Private companies have benefited from greater public awareness and engagement with pensions. It has also reduced costs in some cases. “Pension companies can tell their clients to go into the dashboard for future predictions of their estimated retirement income. In that way they get a lot of use and benefit from it as they don’t have to build the same functionality into their own systems. This can reduce costs.”
Fast-forward 20 years, leaving behind the Herculean task of getting the dashboard off the ground, and what role does it play now in Sweden’s pension ecosystem? Does it give a glimpse as to how the UK’s pensions landscape might change in future?
The dashboard is widely used by the Swedish public, and now has around 80 per cent market penetration. It covers pretty much the entire pension system, although use by third parties remains fairly limited.
The dashboard remains to this day, primarily an information site, although Lundström says it is a lot more interactive than earlier versions, covering both the accumulation and decumulation stage. Users can see retirement income projections, and how these change depending on the actions they take, whether it is saving more, working longer, changing their retirement date or other actions. What it doesn’t do is facilitate transactions, or allow users to compare specific products, for example on performance or fees
As a result the dashboard has not facilitated a significant switch of assets away from larger older providers to newer tech-savvy entrants and market disrupters.
However this isn’t to say that people haven’t acted on this information, and the market has changed in the past decade. Lundström says that there has been consolidation in the pension market in Sweden, but this isn’t solely due to the launch of the dashboard. Similar consolidation has of course taken place in the UK.
“In some ways the dashboard has made it simpler for smaller providers because they don’t have to give all that information to their clients. They can just point to the dashboard instead.”
The dashboard has become a useful retirement planning tool, Lundström, says and is now widely used by many pension advisers when discussing retirement planning with their clients. However, it is the individual client who accesses the information, via their own log on, and then shares the screen with their adviser, rather than consultants or advisory firms having their own white-labelled version of this data.
Lundström admits to having some reservations about how the multiple-dashboard offer, being proposed in the UK, might work in practice.
“At the outset there’s a lot of work to do to improve the quality of the data. There’s different business rules and tax situations alongside different pension entitlements that need to be taken into account when looking at various pension projections. Dashboard providers need to co-operate with different pension providers to understand this data and how to handle it.”
In Sweden it is still just MinPension that is handling this data itself. Lundström says starting off with multiple dashboards could create issues around how this data is used and communicated to individuals, potentially raising the problems of mis-selling.
“I think you need to have a more mature dashboard before you can just put it out on the street and have different providers handling the data themselves.
“You have to control how that data is used effectively. In Sweden third parties can use that data but in a very controlled way, particularly on how they present this information. You have to set business rules for different products to be able to present the data in the correct way.”
However Lundström admits this is likely to evolve within the next three years with European legislation allowing for more Open Finance initiatives. This will see the dashboard working with more third party software. This he says may be a good thing, if it is done properly, but he remains concerned that this ‘screen scraping’ may open the door to those looking to use this information to mis-sell products and services.
But he says there is customer merit in being able to compare products by fees or be able to see if a new health declaration is needed or if the current product has guarantees that you may not get with a new one. This will start to happen for the privately funded part of the dashboard later in the year he says.
“As ever the challenge is ensuring consumers understand the wealth of information that may be available and
know how to engage with and act on this information.”
Perhaps what is most interesting is what the dashboard hasn’t done. Lundström says that there isn’t any specific research that shows that this dashboard initiative has led to increased pension savings, or boosted the overall savings ratio.
“We don’t see anything like that in our surveys.” However he says that while the overall levels of savings may not have changed, there have been changes to Swedish pension and savings habits, particularly around retirement, some of which he attributes to how people are using the information provided via the dashboard.
“Over the past 10 years we’ve seen a big change in retirement behaviour, with more people opting to work part time beyond their standard retirement age. We can see that before people didn’t understand how they could do that.”
Another change he says is an increase in the number of people opting for lifetime annuities at retirement — a trend that seems diametrically opposite to what has been happening in the UK in recent years.
“Since we introduced a retirement planner we can see a big difference in the choices that people are making. People are less likely to take shorter term products that might provide an income for five or 10 years.”
Lundström says the dashboard is also empowering consumers making them more engaged and informed about their retirement, and less anxious or stressed as a result. This has been demonstrated in consumer research in Sweden which compares knowledge and attitudes to retirement among those using and not using this dashboard.
Initially, Lundström says the dashboard was primarily used by high income individuals, with greater knowledge about pensions. But over time Lundström and his team have deliberately tried to increase engagement among other groups, including the lower paid, women and those with relatively low levels of pension knowledge. “We have started to look at different segments of the population and how we could build new functionality to interest them.
“We have put in a lot of effort to improve our user interface, to offer multi-channel options, and to make the dashboard simpler and more intuitive to use, with different layers of information, and this has resulted in far better engagement among these groups.”
Many in the UK pensions industry have been dismayed at how long the UK has taken to get to grips with a pension dashboard. Although legislation is now in place, and a working group appointed to look at delivery, it is expected to still be another two years before savers can start to access this information.
Lundström says that the UK government first spoke to his organisation in 2005, so perhaps progress could have been more advanced at this stage. But he stresses that a complex infrastructure like this will take a number of years to develop and deliver. There are he says big hurdles to overcome.
“Hopefully those in the UK tasked with delivering this will learn a lot from our experience. My advice would be to stick to a small team. You need to be very hands on, so you can build something quickly and move on to the next phases.
“Very close co-operation between the public and private side certainly helps. And it will be a steep learning curve. I have been doing this for almost 20 years and I am still learning more and more about pensions.”