Around £400 million of UK citizens’ hard-earned money lies abandoned and unclaimed in forgotten pensions. The average person moves role 10 times, separate schemes can be notoriously time-consuming to access and – despite efforts by HR, the government and the pensions industry – pensions remain a confusing landscape to navigate, all meaning this treasure gets lost at sea.
And yet the considerable contents of this treasure trove could be returned to their rightful owners, courtesy of a new government initiative that aims to give people a complete picture of their funds and consequently maximise their retirement wealth.
That initiative is pensions dashboards. The government gave the proposal the green light in April and confirmed that industry would design and develop its own dashboards. Although change may not be imminent and it will be pensions providers required to set up the dashboards, it’s worth getting up to speed with what to expect and how to answer some of the questions employees are likely to send HR’s way.
HR magazine posed frequently asked questions about pensions dashboards to experts and here’s what they had to say…
Q: What exactly is it?
A: “Pensions dashboards will give people the ability to trace, view and value all their pension pots online and determine how much state pension they are entitled to,” explains Jamie Jenkins, head of global savings policy at Standard Life.
The only way to get pensions information at present involves enquiring with each provider. Not the most riveting of tasks and, if employees or retirees are juggling a lot of separate pots, it can be a struggle to effectively manage the whole fund. So the pensions dashboards will mean all pots are in one easily-accessible place.
“This will allow them to find any lost pots and, with a clear view of all their investments, make sensible decisions about what to do next,” says Ben Cocks, business systems director at Altus.
On top of this the system will be industry-funded, free for consumer use, and governed by a body of industry representatives, consumer champions, fintechs and public bodies.
Q: So why the plural?
A: Susannah Young, a partner in the pensions team at Burges Salmon, explains: “‘Initially there will only be one: a non-commercial service hosted by the Single Finance Guidance Body; a newly-formed arms-length body of government.
“However, the government has made it clear that enabling multiple commercial dashboards is the right way forward to maximise consumer interaction and allow for industry innovation – provided sufficient consumer protection is in place.”
As such the jungle drums are already beating and several corporates have made it known they’re keen to add a dashboard to their offering.
Q: When is it coming?
A: The government is keeping dates close to its chest and has given the vague timeline of “over several years”. Experts are predicting that the architecture will be designed before the year is out, with an initial independent dashboard released after that. But it’ll be three to five years before dashboards from other providers come into play.
The mammoth challenge of pulling together information from thousands of pension schemes – some still with paper records – is a probable stumbling block. As a result it’s unlikely the dashboard will launch with all providers on board, meaning consumers face a wait for a clear pension picture.
To get that clear picture (and user confidence) mandatory participation is essential, says Cocks. As such, primary legislation that requires all schemes to make consumer data available through their chosen dashboard is expected.
However, agreeing data and security standards for all involved could lead to delays to the rollout, feels Young. “With Brexit at the top of the priority list there’s speculation that the legislation needed will not be given parliamentary time in 2019,” she says.
Q: What does it mean for me?
A: Fifty-seven per cent of employees prefer financial education face to face, according to the Pensions and Lifetime Savings Association, so you needn’t worry about dashboards replacing workplace engagement on pensions. But they could make such events more appealing.
Jamie Smith-Thompson, managing director at Portafina, explains that employee interest in monitoring, managing and maximising pension savings will spike – but seeing their balance in black and white could leave some disheartened.
“This could lead to more people asking to opt out of their workplace pension. Or it could spur some on to pay in more than the minimum contribution. And they’ll need to know how to do this. So, while HR leaders aren’t expected to be pension experts, you can point staff in the right direction for guidance and advice,” he says.
“I’m hopeful that the government will provide suitable training for employers, as well as practical guides for consumers who wish to use the dashboards.”
Q: Is there a catch?
A: Fears of a central database have sparked security concerns but these have been largely alleviated. “The system will operate more as an information-sharing service with a single pension system sitting behind the multiple dashboards to fetch and return the relevant pensions information,” says Young.
But she also highlights consumer protection concerns over commercial pensions dashboards, and controversy over micro schemes’ potential exemption from compulsory data provision as issues some are nervous about.
Q: So what now?
A: After considerable groundwork to flesh out the dashboards’ design we now await legislation that will clarify what’s required from every party. That said, the government has advised pension schemes to start preparing the data now.
This piece appeared in the September print issue. Subscribe today to have all our latest articles delivered right to your desk