Why Do We Need A Pension Dashboard?
The government has announced plans to launch a pension dashboard by 2019. There are lots of different opinions on how this will work and who should manage the process. Here we will guide you through everything you need to know about the plans for the UK pension dashboard.
What is a pension dashboard?
A pension’s dashboard is a digital interface which allows a person to log in and view all of their various pensions, from workplace pensions to personal pensions, in one place.
It is expected that by being able to access the dashboard and view a snapshot of how all of your pension funds are performing you will be able to plan more effectively for your retirement. They will be able to view their projected retirement income and see if they are saving enough to be able to enjoy a comfortable retirement.
It is hoped that the pension dashboard will help people to make an informed decision about which of their pension funds are working effectively, consolidate their existing pensions and make decisions about where best to invest their pension funds. As result of this increase in individual’s engagement with their pension planning, any funds that are underperforming and overcharging will be highlighted; which in turn will drive competition, potentially this could make it harder for providers to retain customers.
Ultimately the aim of the pension dashboard is to get people engaged with their retirement planning early on in their working life.
Why do we need a pension dashboard?
The UK risks being left behind, with regards to saving for retirement, compared to other countries such as Australia, Sweden and the Netherlands who already have their own operational pension dashboards. Currently in the UK there is an extremely complicated process for an individual that wishes to obtain a pension, especially if the individual has multiple pensions. It is incredibly common for people to have contributed to various pensions over the length of their career, with the average person expected to have 11 different jobs in their lifetime.
Aside from personal pensions, state pensions and company pensions the introduction of auto enrolment will also see millions of new small pension pots being created as individuals contribut to a workplace pension then move jobs; potentially build up separate pension pots in each job. Already workplace pensions have introduced 6 million people to pension saving, with millions more expected to join by the final staging date in 2017.
For people to be able to plan effectively for their retirement there must be a simple and efficient way for them to view their numerous pensions.
There are many hoping that the introduction of a pension dashboard will be the first step towards to a more comprehensive way for people to manage their personal finances. Potentially helping people to view their bank balances, savings accounts, investments and any debts in one place meaning they could offset any high cost credit card or overdraft charges against any positive cash balances.
How will the UK pension dashboard ideally work?
At present we do not know exactly how the dashboard will work and this is unlikely to be clearer until the dashboard launches in 2019.
However there is a general idea of how the dashboard should work to successfully engage the UK population.
- A person logs into the pension dashboard once their identity has been verified
- A request will then be sent to all providers of pensions across the industry, via a central engine. This should include pension providers, schemes/administrators, self-invested personal pensions, platforms, master trusts and the state pension.
- Via the central system any data on the individual’s pension including a valuation or accrued benefits, should be packaged up and sent back to the dashboard, in a format that is readable.
- This should enhance the benefits to the consumer by providing a cost effective and efficient solution.
Although the dashboard will cut back on the costs for consumers, it is expected that the build of the dashboard will be relatively expensive. Because of the costs involved pension suppliers are going to want a system that they know will work for them from day one.
What are the plans for introducing a UK pension dashboard?
In 2014 the Financial Conduct Authority published a proposal for the creation of a UK pension dashboard; however the government have only set a planned launch date of 2019.
The first stage of the pension dashboard creation is being co-ordinated by the Pension Finder Alpha Project, which is a cross-industry forum run by the Money Advice Service and receives contributions from the Cabinet Office, Open Identity Exchange (OIX), professional bodies, pension providers, banks and automated technology providers.
A recent report by the Centre for Policy Studies (CPS) has urged the government not to let the pension’s industry take control of the dashboard and instead suggested that the implementation should be controlled by the government itself. There have also been calls for the government being more proactive to ensure that the consumer’s needs are put first.
Around 50% of adviser firms use client management systems which uses the same technology that is needed for the pension dashboard. Here at KDW, our clients are able to access their funds via the True Potential Platform.
Are there any problems that could block a successful implementation of a pension dashboard?
There is much debate throughout the industry about if the dashboard should be just one all-encompassing dashboard or if individual parties, such as pension providers and consumer champions, build their own dashboards and uses the data which is held by a central engine.
Another important issue is identity verification, with 700,000 cases of cyber fraud in the UK last year, it is extremely important that for the pension dashboard is secure. The success of the dashboard will rely on the level of trust consumers have in it
As the dashboard could provide be an opportunity for cyber criminals to access the details of lifetime savings, the security of the dashboard is paramount. This is not an impossible task as there are highly secure systems, for example the Government Gateway, which the verification process of the pension dashboard could be based upon.
Concerns have been expressed that while more progressive pension companies are keen supporters of the dashboard, some smaller firms are more reluctant to get involved as they may not have the technological capability to provide the data that is required.
In order for the pension dashboard to deliver the best possible solution to consumers it should where possible try to take advantage of existing technology. However there is likely to be no end of technology providers clamouring to provide them with a solution which enables them to do so.
In order for the pension dashboard to deliver the best possible solution to consumers it should where possible try to take advantage of existing technology. However there is likely to be no end of technology providers clamouring to provide them with a solution which enables them to do so.
In order for the pension dashboard to deliver the best possible solution to consumers it should where possible try to take advantage of existing technology. However there is likely to be no end of technology providers clamouring to provide them with a solution which enables them to do so.
If you would like any advice on your pension or to obtain a pension valuation, then please do not hesitate to contact an adviser at KDW. We are based in St Albans, Hertfordshire and can be contacted by:
Tel: 01727 85 22 99
Email:mail@kdw.co.uk
For more information on the pension services we offer please click here.