If done right, the pensions dashboard could go a long way towards solving such problems as helping younger people start making important financial decisions earlier in life, or even helping to address the savings gap that impacts women. The opportunity is to engage and motivate people to save.
In the latter half of last year, the government officially confirmed its commitment to the development of a pensions dashboard, which will be rolled out this year, assuming everything goes according to plan.
The benefit of a single unified platform is savers will be able to see a comprehensive display of all their plans, including ones they may have forgotten about. In turn, this will encourage greater interest and engagement with pensions saving among the public.
Since the introduction of auto-enrolment, which came to full fruition in 2017, pension savings have increased markedly. More than £90 billion was saved in 2017 alone, and that is expected to increase further as more workers pass the auto-enrolment age bracket.
This is a very positive change for a society in which 56% of people still proclaim little confidence in their financial acumen. More than 9 million people in the UK have become enrolled into a pension scheme since 2012, many of whom might not otherwise have saved a penny towards their financial future.
However, with employees changing jobs more frequently than in the past, savers will ultimately accumulate multiple pensions over the course of their career. The dashboard will make these more manageable.
Handle with care
There are many benefits to the government’s proposed dashboard, but there are also many questions yet to be answered. One concern is security. According to the Financial Conduct Authority’s Financial Lives report, an average of £91,000 in pension savings was lost in 2017.
It is estimated as many as 18 million people will eventually use the pensions dashboard. This is good news, but a better understanding of pensions needs to be promoted before savers make full use of greater control. Savers must be protected from scams from the outset, and an understanding of data security cannot be overvalued.
We must also be aware of how the dashboard is built. While the Association of British Insurers has been tasked with managing the development of the dashboard, the project group is made up of leading industry providers, all of whom have their own business priorities.
It is important, therefore, that the dashboard is built from its inception with the consumers’ best interests at heart. This means full transparency, including a clear breakdown of charges, as well as easy-to-access information about the different options available.
The dashboard should be completely unbiased, but this needs to be facilitated through an honest and all-encompassing overview to the benefit of the saver – not the provider. With the development of this medium, representation of competitors’ offerings fall under the remit of fiduciary law, and providers will understand they must put their personal conflicts of interest aside.
Another consideration is how the information will be gathered, and where the onus is placed. The government has alluded to the possibility it will legislate ‘where necessary’, to mandate providers into sharing their information on the dashboard.
The dashboard risks becoming redundant if providers are allowed to pick and choose what information they make available. The possible need for legislature was also echoed by the work and pensions committee, which noted concern that incomplete data could in fact lead savers to making bad decisions with their savings.
It has been suggested the Pensions Tracing Service will take on the responsibility for processing the information offered by providers. The problem from a provider’s perspective is they may be reluctant to offer full disclosure from fear of increased transfer rates.
With a dashboard, consumers will expect full disclosure from their provider, and that those who do not participate will suffer a blow to their credibility.
Keith Richards is chief executive of the Personal Finance Society