The Financial Conduct Authority (FCA) has set 31 August 2023 as the deadline for the largest personal and stakeholder pension providers to connect to the pensions dashboards ecosystem.
With just over a year to go, there are still lots of questions to be answered. What will it mean for the sector and consumers? Will it work as planned, and what can be done to make pensions dashboards an asset for both savers and advisers?
As with any new fintech platform – and especially one on such a scale as the pensions dashboards ecosystem – it’s inevitable that there will be some teething problems, write David Hatch, managing director of Options UK, and Mark Adamson, sales director at pension data management firm ITM.
But, despite that, everyone involved in the industry should embrace it as a positive and much-needed technology-led revolution that will, in the long term, benefit consumers, advisers, solutions providers, and the pensions sector as a whole.
Challenges
Pensions dashboards are very important for the sector and consumers because they really do have the potential to revolutionise how people engage with all their retirement income by making it easy to find and see all their pensions data in one place.
Pensions providers and trustees in the private and public sectors – and government too because the dashboards will include state pension data – have all been given responsibility to enable pension scheme members to locate their pension benefits. This can be a first step in educating members too.
But the benefits will only be realised if the ecosystem operates as it is intended to do.
As with any data system, the old IT saying ‘garbage in, garbage out’ still applies. Accurate member identity data is fundamental to the success of the dashboards project. The identification data that each pension member uses has to match up with the data that resides with all the pension providers around the UK.
If it doesn’t match, then pension members will not be able to access an accurate record of their pension scheme entitlements. That’s the first challenge. Making sure that pension members see a complete record of all their pensions benefits is the second challenge.
The final one is enabling them to understand what those numbers mean. A member may be presented with a combination of defined contribution (DC), defined benefit (DB), and hybrid scheme data. That could be confusing enough but, in addition, different providers and schemes have different ways of presenting the pensions data that they hold.
Those factors combined create the risk that it could be very hard for most consumers to work out what the pensions dashboards data actually means for them and their retirement plans. But work to solve that problem is under way.
Work together
From a providers’ point of view, firms must ensure that the dashboards’ source data is accurate, and that consumers have the support they need to understand it.
Consumers will need help from their pension provider in the form of signposting to guide them to the help they might need, and that’s something we at Options UK are already putting in place.
But they will also need support from services such as Pension Wise, and professional advice from IFAs. All of those sectors must work together if the dashboards’ data is going to lead to tangible benefits to consumers.
The industry must embrace the new ecosystem and its aims if all the potential benefits are to be realised. While the pensions dashboards’ primary purpose right now is for it to provide a portal for pension members to access information quickly and easily, it could have the potential to evolve into a pension planning tool in the longer term.
But that possibility is a long way down the road. Right now, the focus must be on the first cohort of schemes linking to the pensions dashboards ecosystem by 31 August next year.
The journey so far has had a few more twists and turns than many in the industry would have liked. However, pensions dashboards are an important milestone on a road that will ultimately lead to a modernised, technologically advanced, customer-focused industry.
This article was written for International Adviser by David Hatch, managing director of Options UK, and Mark Adamson, sales director at pension data management firm ITM.
