The labor market has changed dramatically over the past two decades. An employee can no longer expect to spend his entire career with one employer. Employees can even have multiple careers during their working lives. As a result, it turned out that millions of workers in the UK were not saving enough, if any, for their retirement. In 2012, the UK government introduced automatic registration.
This required employers to place most of their employees in a qualified pension scheme. By March 2019, more than ten million people saved more for a pension than before the start. However, more jobs mean more pension funds per person. Orphaned funds were at risk of multiplying as workers left their jobs and lost track of their pensions. This is how the idea of a pension dashboard came about.
What is the Pension Dashboard?
The concept of a retirement dashboard is simple: it's an online search engine that helps consumers find old pensions that they have lost sight of and, in theory, understand how much they have saved on them.
The initiative was officially announced in the 2016 budget. The government proposed rolling out a retirement dashboard that the industry will design and fund by 2019.
This first deadline seemed to have been lost between Brexit and a change in administration. By last year, the Ministry of Labor and Pensions had taken control and made the Money and Pension Services responsible for running the project.
Deploying new technology systems is never easy, and exceeding the original deadline has led to claims that the industry has been trying to keep up with technology. Coronavirus has certainly told the pension sector that anyone who opposes the use of technology "has to stop hesitating and just move on," said Lesley Carline, director of KGC Associates and president of the Pensions Management Institute.
There is always a caution hint when we talk about technology being the answer to everything and that hint is data
However, she says the idea that the retirement dashboard project will be delayed is a misunderstanding. Although pension systems law has been delayed, the project continues and, like many large projects, will take some time to complete, she says.
Now that the Pension Scheme Act is passed, every pension scheme and provider must have an appropriate technology solution that Dashboard users can use to access their data. However, there are a number of challenges that need to be addressed.
“When we talk about technology being the answer to everything and it's about data, we always have to be careful,” says Carline. "If the data isn't there and accessible, technology is useless."
Planning for digital architecture
Annuities are no different from other branches of financial services when it comes to data problems. Accuracy, reliability, security and easy access with no delay and cost of human intervention are just as relevant for banks and insurance companies as the pension dashboard project.
The issue of data standards with all providers singing on the same anthem sheet is currently being addressed and good progress has been made despite the disruption of COVID-19. However, there are more fundamental considerations for those managing this data.
"Simply put, can you handle the data?" asks Chris Connelly, director of proposals and solutions at technology and outsourcing provider Equiniti and the data expert representing the Pensions Administration Standards Association in their work on the Dashboard project.
Many, especially pension schemes, should not focus on their own membership but look at the overall size of the market. "Anyone who pulls up a dashboard generates a search, so you have to consider total usage," says Connelly.
If the dashboard is a success and millions of people use the dashboard each year, can your company do it in-house or do you need to work with a technology partner to manage that traffic?
The challenge of data standards
Data quality issues not only hinder the process of handling dashboard requests, but also add to the cost of providing responses. The data needs to be found in a certain format so that it can be presented to the consumer in a way that allows them to understand their retirement savings.
Once the data standards are set, there is no guarantee that the assumptions used to get to the data will be standardized in order to provide consumers with information they will understand.
This is a major concern of former Pension Minister Baroness Ros Altmann, who fears that without a simplified standard there is little chance of providing a meaningful consumer dashboard. A meaningful dashboard for Lady Altmann would include numbers that a consumer can either understand or trust to make an informed decision about their retirement plan.
But how is this achieved when there is no consensus on standardizing the simplest paper-based pension statements?
"A dashboard would possibly help consumers, but it must be precise and implemented in such a way that consumers can be confident of safety and reliability," says Lady Altmann. "Standardized, simpler statements, simplified terminology, better financial literacy and more guidance or advice will be required to provide a new approach for consumers to relate to."
A Future for Financial Wellbeing?
Before COVID-19, a growing number of employers had started to develop their service structures. They moved from certain milestones like retirement to taking a holistic approach, focusing on how finances impacted not only the wealth but also the mental and physical health of their employees.
The programs usually focus on reducing debt and setting goals for short-term savings. The ultimate goal is not only to convey possible goals to the individual, but to enable them to achieve them. Some believe that retirement dashboards will only be successful if they are incorporated into consumers' everyday financial traffic.
"When it's tied to open banking and banking or budgeting apps and we can integrate patient information with money information, it becomes more mainstream," said Sir Steve Webb, former retirement minister and partner at LCP. But this remains a long-term project, he says, and we are years away from achieving that level of commitment.
Helping consumers plan their retirement
However, dashboards offer the ability to change the way people interact with their retirement, so that they can find out basic information at the touch of a button and at the touch of a button.
It has been slow development, but now progress is being made in creating the dashboard ecosystem and that momentum needs to be maintained, says Darren Philp, director of politics and communications at Smart Pension, a technology company. "This project doesn't have to be a moon shot," he adds. "It would be a positive first step to just start giving people basic information to help them plan their retirement."