Technology is not an issue for delivering Pensions Dashboard
The Pension Freedoms have the potential to do something that all the previous rules, regulation and legislative changes have never achieved – to get people engaged with their pensions early in the savings journey and not just nearing the point of retirement.
The initiative was long overdue – it is estimated that people spend more time choosing their annual holiday every year than they do on their retirement planning.
There is no doubt the freedoms have raised the profile of pensions. The ability to decide how best to take benefits, and to consider whether to pass pensions down the family generations as well as to other beneficiaries, has delivered a flexibility into the market that has not only turned tax planning on its head but will require that people make some big decisions about their retirement planning. Financial advisers attest to an increase in the number of people coming through the door to talk about their pensions – and not just the so-called insistent clients – which is good news for the adviser market.
And, of course, the pensions market is being extended – automatic enrolment has already brought another six million people into pensions saving and that will increase through the final staging dates this year and into 2017.
In consequence, people need faster and better access to their pension information. Which is where there is the opportunity to raise the profile of pensions even further.
Currently, obtaining a pension valuation – or several pension valuations, as most people are expected to pay into more than one over the length of their careers – is not always a simple or efficient matter, but it needs to be if people are to get to grips with their retirement saving and planning.
Hence the pensions dashboard is seen as fundamental to the overall pensions freedoms movement, as confirmed by George Osborne in his 2016 Budget speech when he verified that the Government was looking to the industry to deliver a pensions dashboard solution by 2019.
Milestone for pensions and advice
This could be a milestone for both the pensions industry and the financial adviser market, facilitated by the development of the pension dashboard.
Imagine that in 2019 every pension-paying member of the public can sit at a computer screen, log on to a dashboard and, having verified their identity, at the click of a button can get access to up-to-date information and valuations of all their pension holdings – DC, DB and State Pension.
Furthermore, in addition to having an overview of their pensions, which will enable them to see exactly what they have built up and what more they need to do to achieve the retirement income they aspire to, the dashboard will help consumers locate lost pots, and make informed decisions on retirement planning.
It is a significant step forward from where consumers (and their advisers) find themselves now and the opportunities that it delivers to the industry are tangible.
For advisers, there will be increased opportunities to bring on more clients, potentially providing assistance through digital or online services if that is seen as an appropriate model for their business, as well as providing financial advice.
For the pensions industry, there is an opportunity to build greater confidence into the market around pensions’ ability to deliver long-term results for consumers.
Building a dashboard
So what’s needed to build a pension dashboard? There are four elements required for a dashboard to work for the consumer.
First, the dashboard itself
There is debate at the moment whether there should be one all encompassing dashboard or whether various parties – for example, pension providers, schemes and their administrators, trade bodies and consumer champions – could build their own dashboard, provided with all the relevant information and data by a central engine, to deliver a consistent, secure and low-cost service.
Second – identity verification
This is vitally important and has to be 100% right if consumers are to trust and have confidence in using the system and to keep out scammers and fraudsters. A pension dashboard could present an opportunity to gain access to the details of people’s lifetime savings, so security is paramount. There are highly secure systems like the Government Gateway, which set a practical precedent for this type of verification process.
Third – a central data-facilitating hub
This central engine will need to receive the request from the consumer, via a dashboard, check it is verified, then go out to all providers of pensions across the industry (pension providers, schemes/administrators, SIPPs, platforms, master trusts etc. and including the State), to request any data they have on the individual’s pension entitlements, including a valuation or accrued benefit. The engine will receive those various pieces of data, package them up and send them in a format that is readable on the dashboard. This cuts down on cost and complexity and improves efficiency, thereby enhancing consumer benefit.
Finally – pension company input
There are costs to be incurred in building this capability, so pension ‘suppliers’ that will be providing the data and valuations, will want to have access to a tried, tested and trusted system that is going to work from day one and has the capability to capture and deliver data and especially the vitally important valuations, in the simplest, most efficient, and cost effective means possible. In other words they want a system they know is going to work for them.
So where are we now?
The industry is further on in developing the technology and standards to deliver the dashboard than many people may realise. The initial stage of the pensions dashboard initiative is being co-ordinated by the Pension Finder Alpha Project. This is a cross-industry forum which is being run by the Money Advice Service, with input from the Cabinet Office, Open Identity Exchange (OIX), alongside professional bodies, pension providers, banks and automated technology providers like Origo. Origo is leading the Architecture and Standards workstream for the Project.
The Project is making good progress and it is due to report this month (May 2016), with a view to keeping the momentum going to achieve the Government’s 2019 deadline to have a pensions dashboard up and running.
From a technology perspective, last summer the industry tasked Origo to deliver the engine that will sit between the dashboard and pension companies to enable the safe and secure transmission of data between the two. We’re currently working collaboratively with the industry to develop the open messaging standards and the technology that will make that happen.
The engine is being based on an integration hub, currently in the final stages of development, which will enable platforms and providers to more efficiently share data with third parties. This service already supports the sharing of pension valuations, a critical component of the dashboard landscape and extending this to support dashboards is a natural development of the hub’s functionality.
So, governance, funding and other issues are already well in hand as is the technology to enable individual companies to gather the information to display on pensions dashboards.
Joining the forward thinkers
For momentum to gather pace, and to generate wider industry and consumer confidence, we need to continue to progress the standards and technology already in development that will deliver the end result for the consumer.
There are concerns that while the progressive companies in the industry are keen to get behind the dashboard, there will be some pension companies that will be unwilling or, in respect of legacy products and technology, be less able to deliver the pensions data required.
Whether it is possible to get every provider onboard by 2019 will have to be seen. The conclusion of the Pension Finder Alpha Project work, and the inclusion of the State Pension valuations, will encourage cross-industry participation and provide the basis for reasonable coverage, which is the key requirement to getting the pensions dashboard up and running.
We believe the good work being done by the early adopters will act to draw other companies into the development stream, to ensure consumers can get access to all the information they need to make fully informed decisions around their retirement planning.
Building on the considerable progress to date the industry now has the opportunity to push ahead and if it does, there is no reason why the pensions dashboard cannot be made a reality sooner rather than later – for the benefit of consumers, pensions providers and financial advisers.
Want more? We've penned some thoughts on the Pensions Dashboard, right here >