Pension dashboard: international lessons learnt
Australia, Sweden and the Netherlands have pension dashboards, where savers can see all their pensions in one place, while British savers risk being left in the 'slow lane' unless the UK government takes a more proactive role in the creation of a UK version.
People currently have an average of 11 different jobs in their lifetime, which makes work pension pots hard to keep track of. Currently there are £400 million in unclaimed pension savings.
If created, the pension dashboard would offer a snapshot of all pensions in one place, and allow people to plan for retirement more efficiently.
It would also pave the way for people to view their projected retirement income, consolidate their different pension pots, compare pension providers across the board and choose how their pension gets invested.
Despite years of discussion and the Financial Conduct Authority's proposal in 2014 for the creation of a pension dashboard, the UK is only planning to launch the dashboard by 2019.
Key industry players have been working on pilots for the dashboard, but commentators say there has not been enough cooperation or legislation on this matter.
Steve Webb, director of policy at Royal London, says: “Citizens of countries such as Australia, Sweden and the Netherlands already have the benefit of access to pension dashboards. It is unacceptable that the UK is in the slow lane and our savers are being left behind.”
On Monday (16 May) Royal London hosted a conference to bring together experts from countries that already have a pension dashboard with the UK pension industry and policymakers.
Speaking about the Australian experience, Robert DeDominicis, CEO at financial technology provider GBST, explained that Australian policy makers had three aims for the current pension system: to provide adequate levels of retirement income, to relieve pressure on the state pension (which is means-tested in Australia) and to increase national savings in order to create a pool for investment.
Since 2014, Australian employer contribution rates have been 9.5% and they are set to increase to 12% by 2025.
Initially, employer contributions were introduced at 3% and increased gradually. Mandatory employer contributions began with big firms and cascaded down to smaller companies.
Employees can choose where their pension is invested. In addition, there are no fees on invested pensions for people with smaller pots.
The creation of a pension dashboard was enforced through legislation, and this, said DeDemonicis, has ultimately led to the industry creating its own variations on the theme.
When asked about issues of security, DeDominicis explained that he is not aware of any pension scams to date, and that people can only transfer their pension pots to their own accounts, rather than to anyone else.
Today, Australia is the fourth largest investment fund market, and DeDemonicis said it is driven by pension funds.
Michael Johnson, research fellow of the Centre for Policy Studies, who sat in the audience, voiced 'pension envy' following this presentation.
The Netherlands launched a pension dashboard in 2011. Paul Duijsens, head of strategy at Dutch national civil pension fund ABP, explained that people increasingly want more choice.
The Dutch pension dashboard allows people to create a simulation of their income in retirement. They can adjust settings such as the time they retire, whether they want to receive more money in the first year than thereafter, and they can add in life events such as divorce.
In the Netherlands too, the pension dashboard was created through legislation. And it has been mandatory for pension providers to provide data. People's information is updated monthly, but it is not yet possible to consolidate different pots into one fund.
The Dutch dashboard allows people to see at a glance how much pension income they will receive net after tax.
Talking about Sweden's dashboard, Ole Settergren, director of research at Pensionsmyndigheten, says that Sweden does not have a feature for people to view their pension after tax yet.
But the take-up rate of the dashboard has been good since it was introduced in 1999. About half of Sweden's five million strong workforce currently uses the pension dashboard. Again, the government legislated for the creation of the dashboard.
Many of the discussions in Sweden have been about the kind of projections the pension dashboard should show. More specifically, they have focused on whether projections should be made on money already accumulated or whether they should include future income.
In the end it was decided that projections should be made on expected future pension provision if the person continues in their current role.
Settergren explained that the pension dashboard only cost €500,000 (£393,000) to create, and it costs €3 to €4 million to maintain annually. Various voices from the audience agreed that this was cheap.
Royal London has called on the UK government to be more proactive in coordinating the many interested parties while making sure that the needs of consumers are put first.
Getting the many different parties involved to work together in the interests of the consumer is a big job and may require legislation, argued Webb in a recent policy paper.
"Government has been too 'hands-off' to date and needs to drive this project forward, otherwise savers will continue to have far too little information about their overall pension position," he asserted.
This article was written for our sister magazine Money Observer.