Michael Johnson argues that merely providing information will not embed the forthcoming pensions dashboard into the consciousness of the general public.
To spur individual action, it must demand engagement by offering utility to unlock its huge potential value to consumers through, for example, the ability to consolidate disparate pots into one place. This would improve their bargaining power with the industry, leading to larger retirement incomes via lower costs, and other scale economies.
Utility would also help drive competition within the industry, kindling trust between it and consumers. Ultimately this would encourage more people to save more, helping to close the savings gap, to the benefit of the individual, UK plc and the industry.
The report provides nine proposals concerning dashboard implementation:
- Proposal 1: The first dashboard should be hosted on a “.gov.uk” website, perhaps overseen by the forthcoming pensions guidance service.
- Proposal 2: A multi-dashboard market should be served by a central communications hub to minimise the number of required connections between each dashboard and the many industry participants. The hub should be overseen by a body independent of the industry.
- Proposal 3: The Government should prepare the ground for the dashboard by mimicking Australia’s SuperStream programme. This would require employers, pensions funds, service providers and HMRC to adhere to standardised electronic pensions data and payments processing, linked by National Insurance number, to facilitate consistent messaging standards.
- Proposal 4: The forthcoming Funds Market Practice Group report into transfers should favour in specie (i.e. non-cash) transfers, where possible, and insist that assets may only be transferred to accounts controlled by the customer and bearing his National Insurance number.
- Proposal 5: The dashboard’s ministerial champion, Harriett Baldwin MP, should appoint a small governing board, independent of the industry, to mentor the dashboard project. It could operate under the aegis of the forthcoming pensions guidance service.
- Proposal 6: The Government could provide some focus to the development of the prototype by requesting that it be built specifically for the 4.6 million members of the Local Government Pension Scheme (LGPS).
- Proposal 7: From 2019, small pots (with less than £2,000, say) and lost (or orphan) accounts should be exempted from all charges and fees.
- Proposal 8: A 2019 deadline should be set by when all life companies’ closed books should be “dashboard-ready”.
- Proposal 9: The Government should set some interim delivery dates for the dashboard, ahead of final delivery in 2019.
Michael Johnson explains:
“An air of politically accommodating ambiguity surrounds the dashboard’s development, particularly in respect of accountability and responsibility. The Government, having chosen to steer the boat rather than to row it, is performing a delicate ballet, seeking to nudge the industry to lead.
This is at odds with international experience of what is required to realise a successful dashboard. Australia, Denmark, the Netherlands and Sweden all used legislation to shove, rather than nudge, the industry into participating, particularly to compel data submission to the dashboard. However, the Government’s strategy is understandable given its chastening experiences with IT-centric projects. In addition, it has given the industry an opportunity to shape its own destiny.
This could induce a dose of business schizophrenia amongst a minority within the industry: a fully functioning dashboard would highlight poor performing, high charging providers. They could choose to play chicken with the Government, by prevaricating in perpetuity. Consequently, given the absence of any legislated “driving imperative” or formal contractual arrangements with the industry, the top priority for the dashboard’s ministerial champion, Harriett Baldwin MP, should be to establish an independent governing board. Its purpose would be to keep the melee of project participants and stakeholders moving forwards, thereby helping to ensure delivery.
A pensions dashboard should be merely the first step towards a comprehensive dashboard to display all facets of our personal finances. It should display bank balances, savings accounts and investments alongside liabilities so that, for example, users would be a mouse click away from offsetting high cost credit card overdrafts and consumer loans against any positive cash balances (today yielding next to nothing). Thus consumers would be able to dramatically improve the return on their assets, by disintermediating the retail financial services industry, much of which we do not need. Indeed, it is one of the underlying causes of the UK’s poor productivity growth.”