Chris Connelly
Propositions & Solutions Director, EQ
I have been very interested in the explanatory videos that the Pensions Dashboards Programme has been publishing recently. Videos do a great job in bringing to life a fairly complex topic and these are well worth a few minutes of your time. The following film gives a good understanding of how the dashboards will work in practice. Read more here.
The dashboard is aiming to provide a clear and complete picture of a person’s pension. What adds value from a member’s perspective is not the architecture or mechanics of the dashboard, but the outcome and what will be displayed.
Why ‘find’ will be essential
Let’s think about the use of the pension dashboards for a regular pension holder. Or, indeed, someone who might not even know they have pensions at all. Having to gather information about every pension you have ever had, or may have had, seeking contacts for their current location, and working out what those numbers mean to your future plans, are very daunting tasks. Based on his own pension history, Richard Smith from DashBoardIdeas.co.uk has put together a brilliant video case study. The film shows the potential enormity of a task for an individual and also demonstrates the benefit of finding all your pensions in one place. You can watch it here:
As Richard says in the film, he has an advantage in that he pretty much knows where all his pensions are. Just imagine how much harder this task would have been if he had to find them first. For that reason, I’d echo Richard’s views that we should not underestimate the value of providing the all-important “find” function within the pensions dashboards as the main priority.
Taking the pain out of the calculation
Even if you know where your pension pots are, this doesn’t make it any easier to pull pension values together in a comparable way. We don’t exactly know how data will be presented in the dashboard yet. But considering what might be included, Richard highlights the challenges of trying to understand the combinations of the different numbers that could be provided. A mix of Defined Benefit (DB) and Defined Contribution (DC) pension pots will be a reality for many potential dashboard users who are preparing to retire in the next 10-20 years. The dashboard will need to do what few have attempted in our industry and try to present multiple types of benefit together as one meaningful pension income figure.
All towards a helpful tool
There is no doubt that “finding” and “calculating” will be the biggest benefits of the pensions dashboards to the end user. But there is value in doing find first, while industry takes the time to resolve how to do the calculations meaningfully.
Future generations may well have fewer barriers to understanding as DC becomes the overwhelming primary benefit type, but we also need to remember that DB will be around for a long time, and new benefit structures are entering the market. Not least of which being CDC following Royal Assent to the Pensions Act on February 11th.
But for the older pre-retirement population, there will still be more variety and more graft in working things out. If the pensions dashboards can reduce some of this burden by at least bringing the sources together, it will be of real benefit to the millions of people who fall into this demographic. The pensions dashboards will allow them the clarity they seek, a vision of their retirement, and the ability to change their future, in good time, if they need or wish to do so.