REBA Inside Track: Pensions engagement must continue despite pensions dashboard setback
Last week, Pensions Minister Laura Trott announced a reset of the Pensions Dashboard Programme. This is a further delay to a project which, despite its crucial mission and the many brilliant minds involved in bringing it to life, has been beset with delays over many years now.
This current delay will further push back the timetable for schemes to connect to dashboards, and by association the delivery of dashboards for consumers to use. No new timelines have yet been set.
The main goals of pensions dashboards remain as crucial as ever – to help people keep track of their retirement savings, reconnect with lost defined contribution (DC) pots and defined benefit (DB) pensions, and understand what part the State Pension will play in their retirement planning. All from the comfort of their sofa.
According to the Pensions Policy Institute, the value of lost pensions in 2022 was £26.6 billon. Job moves, house moves, and other life priorities all mean that people lose track of the pots they’ve accumulated with different employers across the course of a working life. Unless people have a straightforward way to reconnect with them and find out how much they are worth, it is difficult for them to answer the questions at the heart of pension planning – how much money do I need to retire, what will my standard of living be like, and how do I turn my pension pots into the income I need?
The main beneficiaries of the dashboard are likely to be Generation X, who are getting ever closer to retirement. They may have accumulated a patchwork quilt of DB, legacy DC stakeholder pensions with long-defunct providers, public sector, employer-specific DC trust-based schemes, DC master trust and GPP (group personal pension) contributions across the course of a working life. I can personally claim at least one of each of those, bar the public sector.
Over Gen X’s pension savings lifetime, scheme governance has been variable, and communications infrequent and badly designed. Even if people have kept track of their pensions, understanding what is in them and what that means in terms of total retirement income has been far from straightforward.
The dashboard remains the pinnacle in terms of getting all of everyone’s pension information into one place in a usable, trustworthy, secure and cost-effective way. But the challenge of helping all employees, and Generation X in particular, engage with pension savings is too pressing to wait. There is an information vacuum which needs to be filled as a matter of urgency.
Research with pension scheme members found that 82% said they liked to be in control of their finances – but just 18% said that they felt in control of their pension.
Pensions engagement needs technology and connection
Technology, such as dashboards, has great potential to change that. The dashboards preparation work that many large schemes and providers have already done will put them in a good position for improving digital communications with members.
Wider fintech innovation both in pension schemes and among new technology providers who are creating services that complement pensions, should drive many opportunities to help employees better engage with their retirement savings.
Closer links between pension schemes and other financial institutions (such as Scottish Widows’ ownership by Lloyds Banking Group and potentially NatWest’s acquisition of Cushon), are already starting to bring pensions in from the cold by including them in apps alongside other types of savings products. This helps to make pensions look and feel like an everyday part of people’s finances.
Simpler annual benefits statements, while not a technology solution, should now give employees yearly, straightforward breakdowns of what’s in their DC pots. This could help employees build their own picture of retirement savings more easily – at least based on the pots that they know about.
Opportunities for pensions innovation
But there is so much more to be done. Even when they are up and running, pensions dashboards will only answer half of one of the three questions I’ve outlined above. Knowing how much money you have doesn’t mean you know how much you need to retire, what your standard of living will be like, or how to achieve it.
Providers are starting to address this by integrating the Pensions and Lifetime Savings Association’s Retirement Living Standards, which set the income needed for a minimum, moderate and comfortable standard of living in retirement, into communications and retirement planning tools. Some technology providers are also beginning to address the complexities of modelling retirement income over time to help savers identify how to transform their DC pots and DB pensions into a retirement income for the rest of their lives.
Yes, the dashboard delays are a frustration, but to do their job they must be easy to use and fit for purpose. That is worth the wait. In the meantime, existing providers, start-ups and the wider financial community have golden opportunities to use technology to transform pensions engagement into retirement engagement – which is what all workplace pension saving should be about.