With less than two years to the widespread launch of pension dashboards, industry awareness of the opportunities they will bring is low and big questions around implementation still remain unanswered. To download a PDF of the round table supplement, CLICK HERE.
Speaking at a Corporate Adviser round table last month, Richard Smith, a pension dashboard consultant who has worked on the Pension Dashboard Programme, for the PLSA and with the Pensions Policy Institute, as well as for Moneyhub, outlined a number of misconceptions that persisted.
“A lot of people are talking about the pensions dashboard. They don’t know there are going to be many dashboards. There’s going to be one from the Government’s MoneyHelper service, as well as a number of other qualifying dashboards from providers and people like Moneyhub. They also don’t realise these dashboards are going to be highly regulated by the DWP, Treasury and FCA and have Pensions Dashboard Programme design standards. They don’t really understand what the central identity service is, or how personal data matching is going to work and how successful that will be.”
Smith said probably the biggest issue of misconception and contention is the fact that as the rules currently stand, pension valuations will not be able to be used in modelling.
“When we talk with schemes they think ‘we send a number up to a dashboard, and how is it going to manipulate that’. Dashboards can’t touch any number. People don’t realise that the Government has banned modelling.
“But there is a tension there, because there is a shedload of research that shows that, for the engaged community, typically the 55 year olds upwards, once they’ve seen their pensions, they want to model them. Can I pay some more in? Can I retire later? Can I do something else? We’ve got a tension here that Government has gone for multi dashboards, but it’s locked down their functionality.”
Hymans Robertson partner Rona Train said: “Only 10 per cent of people register online for pensions. We are far too literate, numerate and well-paid in the pensions industry to think about these people who are actually going to be seeing this dashboard. I have a client who is a tyre fitter – your average tyre fitter is not going to know what a modeller can do. We can create as many lovely tools as we want but what people want is simplicity.”
For the many
Scottish Widows director of workplace pensions Graeme Bold pointed out that the launch of pensions dashboards would mark the start of a long learning process. “It will be steps on the way. When pensions dashboards launch, we’re not going to get to day one with everybody seeing everything in one place, everyone’s digitally registered and all of a sudden the yeah right anyway but I get on and crack on with some stuff but yeah so I’ve just changed the headings actually just to make him a bit more up a bit morey’ve got a clear view of the future.
“If [as a result of the dashboard project] the UK population becomes aware of the pensions they hold across multiple providers and that takes us a few years to achieve that, that’s a fantastic achievement. For some, taking sensible steps to consolidate in the right way might be the next stage on the journey. And the next step might be to think more broadly about financial planning and the future of their money.”
Bold shared the insights from Scottish Widows, which by virtue of being part of Lloyds Banking Group, is included in the bank’s app.
“People get to see their pension quite regularly. But they are not doing a lot more with it. We get some changing their personal details, some consolidating – a couple of hundred a week. But the vast majority are really just getting to understand what their pension is.
“I had someone say to me recently ‘oh my sister just discovered an old pension’. So how did that happen? It was on the banking app. What the dashboard does in the first place is help people discover the £20 billion in lost money in pensions,” said Bold.
Smith pointed to evidence from other countries that had introduced dashboards. He pointed to user data from The Netherlands that showed a spike in usage amongst those in their 50s and 60s. The Danish version spikes at age 64.
Smith said: “But every other country apart from Israel has only done one dashboard. So other countries aren’t always useful evidence because we’ve got multi dashboards and the hope is from UK government that the 20-, 30- and 40-year- olds will use them to see what they’ve got in different places.
“They’ve done an English language demo with modelling and they’ve found people want to do sliders,” he said.
Smith explained that Danish providers are all required to send 11 projections to the nation’s dashboard for every year from 60 to 70, and the system adds them up as it slides across. He also quoted learnings from Anders Lundstrom, CEO of Sweden’s Minpension.se dashboard, who had said ‘transparency hurts a lot in the beginning – the more data you expose, the more you spot the cracks in the data’, and ‘older, affluent males are noisy’.
He also confirmed that pensions in payment are not included, and said this can cause problems, where a person phasing retirement draws a pension and then it will disappear from the dashboard.
Train pointed out that this could have the effect of undermining trust in the system.
Mercer head of proposition Stephen Coates said that part of the reason people have not understood how to use a modeller is because they have not been perfected or pushed towards them. He said: “As an industry we haven’t put an awful lot of effort into developing modellers. With this new data readily available, this will drive the market. We’ll end up with a much more sophisticated modelling capability, which is easier to use. And we will feel bolder in pushing people towards that, because we know we’ll have some way of helping them interpret that data and understand what insights that can give.”
Aegon EBC director Martin Trenchard said: “We do run the risk of overwhelming people with going from not knowing anything to just having a mass of data in front of them. But dashboards will be a force of good and can be transformational.”
Moneyhub key account director Paul Goodwin suggested that to help ensure people aren’t overwhelmed with data overload at launch, the industry should spend the next two years preparing scheme members for what is to come. “We can start to drip feed information to them about what’s coming and what you’ll be able to see, and what are some of the steps you can take off the back of that,” he said.
Barnett Waddingham Luke Thackray said: “Having easier access to data will lead to more experimentation with how we use that data, in visualising it, in collecting it, in UI, in modelling. Some of these experiments will fail but we don’t want the regulations to stifle that experimentation too early on.”
Delegates debated whether fear of misselling was behind the government’s desire to push back against allowing modelling of raw data. As the Pension Schemes Bill passed through the Houses of Parliament in 2020, amendments were tabled aiming to restrict commercial providers’ access to dashboards. Speaking at the time, Labour peer Baroness Drake said: “The dashboard should inform and engage people, but commercial versions which allow for transactions could lead
to mis-selling and provider nudging. Indeed, for some vulnerable consumers, having a transaction function alongside information on all of their savings could result in poor and costly decision- making. Some could even be scammed out of everything.”
Smith outlined the sheer size of the undertaking – with around 25 million working age adults and about 100 million pension entitlements to be added to the system – and the broad policy goals that brought with it. This was part of the reason why government had not wanted to facilitate modelling functionality from day one, as this would only be used by a small proportion of the target audience.
Bold said: “We’ve got to be clear on defining what success looks like for the dashboard in three years’ time and not be disappointed if the outcome on day 100 is that most of the UK population now knows what they’ve got. That’s an amazing outcome, right? We’ve got to be careful not to be guided just by the 10 per cent that fully engage and use all the tools.”
However, stakeholders at the event supported lobbying to get government to change the rules to allow modelling.
Bold said: “We want to have big data behind it and bringing the whole piece together. And ultimately, all these robo models that are in competition with each other, we will work out how to use that data and plug it in in a way that gives people a next step. It might be traditional tools, but it also might be plugged into more of a robo advice process for people. That would be the ultimate.”
Hugh added: “We’re working at the moment with Moneyhub on how we begin to bring some of that together, because I think arguably one of the biggest, if not the biggest thing that is going to affect outcomes is the quality of support people get. How do we get better guidance? How do we get better access to advice? So actually using the existing Moneyhub capability, you can begin to look at more pensions, you can gather those together, but it’s not a complete record because not all of them are available to be picked up.”
Trenchard said: “The dashboard itself isn’t the big part, it’s what sits around it. I wouldn’t use the word ‘modelling’. We’re looking at the concepts of education, guidance, advice.”
Train said: “Employers have a huge part to play in this. Jeanette Weir’s [of Ignition House] research on DC members shows they don’t trust pensions. Messaging that comes from the employer tends to be more trusted than it does from external sources. So working with employers to get the message out is going to be crucial.”
Coates pointed out that the raised awareness of multiple pots could lead to a diminution in the engagement with the employer. He said: “The dashboard could to a certain extent push the ownership more onto the individual because they’ll be able to see the bigger picture. So they won’t necessarily be wedded to that to their employer or to their current pension provider in the same way, because they’ll now see a big picture. This may shift the onus of responsibility onto who develops the technology to help people.”
Bold agreed with both perspectives. He said: “You’ll present an interesting conundrum for employers and the master trust boards as well. Once people can get a view of multiple pensions at once and not just their current employer’s one, there will be a question as to the role of the employer. They’re both really important parties and they’ve got a part to play in it, but they will influence and change the nature of their role.”
Coates added: “I think we’ll hear the term ‘anchor product’ being used for the next few years.
Delegates debated how data should be presented. Smith said he had seen research that showed people like to see a single, rounded-down number for how much they would get a month, which Thackray pointed out went contrary to the pot-size approach of DC engagement today. Train added: “We need to focus on how to bring that income figure into context. And this is why I think the PLSA retirement living standards should be built in as a key part of the dashboard.”
Coates pointed out that currently, an income projection for a single pension gives in many cases such a small sum that people become demotivated. “If you put all the pensions together, which is what dashboard is going to do, it makes the situation look a lot better. So it makes people feel more optimistic about what their money might give them. Then if you include other assets as well, to give the fuller context, you go from somebody who thinks the whole thing’s a waste of time to them thinking actually this is worth doing. This is really an engagement game changer – not the numbers themselves but what we do with them on top.”
Train pointed out that some people might be overwhelmed by opening a dashboard and seeing perhaps eight or 10 different accounts on one screen. Smith said research by European financial services body EIOPA had shown that when given a single aggregated income figure on the first page of a dashboard, 75 per cent of users never go beyond that page. Smith said: “We don’t know whether we are going to be allowed to do totalling yet.”
This is because of the broad variety of projections and indexation approaches available through the market, partly down to different actuarial assumptions on similar products, and partly because of the structure of the products and entitlements themselves. The picture is further complicated by the fact that DC pots are required to present annuity income yet most will be taken as drawdown. Smith said: “The jury’s out on whether the government will allow us to do totalling. I think it’s essential.”
Train argued that the complexities in underlying data generation offered an opportunity to consider harmonising the entire system. “If you look at an SMPI projection, that will have a different set of assumptions in it to the company’s modeller nine times out of 10. To my mind. TM1, which is the Financial Reporting Council’s requirement on the way SMPIs are done, shoudl require one consistent set of consistent assumptions. At the moment providers and advisers all use different sets of assumptions. Somebody could have five different sets of projections at the moment. We need TM1 to say ‘this is the set of assumptions’ and that’s that.