Will the pension dashboard ever happen?
In his last Budget speech, George Osborne stated that the government will ensure the industry designs, funds and launches a pension dashboard by 2019 - but how likely is the creation of a dashboard?
People currently have 11 different jobs on average in their lifetime, which can make workplace pension pots hard to keep track of. If created, the pension dashboard would be an online platform where people could view all their various pensions in a single place.
Michael Johnson, research fellow at the Centre for Policy Studies, expounds the advantages of the pension dashboard.
Disrupting the pension industry
He says: “Fully functioning, the pension dashboard could become the ultimate disruptor of incumbent industry providers, because by offering consumers a simple overview of all of their pension pots, it could break the industry's cultural attachment to a lack of transparency.
“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 row it, is performing a delicate ballet, seeking to nudge the industry to lead.”
He argues that this is at odds with international experience of what is required to realise a successful dashboard, and cites Australia, Denmark, the Netherlands and Sweden, which “all used legislation to shove, rather than nudge, the industry into taking part, particularly to compel data submission to the dashboard.”
However, former pension minister Ros Altmann says: “I would be surprised if the government legislated to force people to electronically provide a dashboard. I think a version of something will happen, but it won't be comprehensive.”
Two or three providers might offer a digital platform, but it may happen later rather than sooner. “While auto-enrolment is going through, what we're also seeing is that increasingly the workplace pensions are going into a few big funds.
“The more the marketplace coalesces around a few big providers, the easier it will be to get this dashboard up and running.”
Fragmented pension history
At the same time Altmann explains that many older pension schemes will never be online, because their records aren't electronic.
The cost of putting their data onto a digital system would be enormous, and there is no new money coming into these older pension schemes, because they are legacy products.
“It would be an enormous cost on providers who don't have electronic systems. The ones that want the government to push the dashboard through via legislation are the big providers who would get a competitive advantage from it because they are low cost.”
Altmann notes that the UK has a much more fragmented pension history than many other countries.
“If you look at Holland, they have got a dashboard, but hardly anyone looks at it. They like to know it's there, but there's not a lot of evidence that they're using it in a way you'd like. So it's not clear there's an overriding urgency to introduce it in the UK.
“The best we could hope for in all the legacy products, both defined benefit and defined contribution, is that you get some kind of standardised statement, so people can see what they've got in a comparable way, but not necessarily on a dashboard electronically.”
She adds that she would not be surprised, and indeed she would support, for the government to require standardised statements.
“Because at the moment it's very confusing for consumers, who get a different type of statement for each type of pension scheme and each company - something that is often very similar. That could be mandated.”
This article was originally written for our sister magazine, Money Observer.