By Dale Critchley, Policy Manager, Workplace Benefits at Aviva
The priority for the PDP is to deliver a dashboard with the widest possible coverage in terms of the number of customers and pension schemes that can be included. Consumer testing with pension scheme members has shown little tolerance for missing pensions, meaning the first task is to reunite the typical person approaching retirement with an average of 11 different schemes.
The need to reunite people with their pensions is unequivocal, and a key deliverable for early iterations of the dashboards.
Success will rely on the accuracy of scheme data, but also the sophistication of the logic matching the personal data, sent to the scheme by the “pension finder”, with scheme data. This is something that individual pension schemes will be responsible for. If the matching logic can’t identify that “Ben” and “Benjamin”, or even “Road” and “Rd.” are a match there’s a risk that people won’t find all of their pensions.
Once pensions are traced, a key aim of the Dashboard programme is to combine information from different types of scheme into one cohesive and easily understandable view of what an individual might receive as retirement income.
Given the complexity of the UK pensions landscape this is no easy challenge, and the data standard proposals reflect the tension between the need to keep things achievable, within a reasonable timescale, across the widest number of schemes, and the experience of the end user.
The proposal is that schemes will provide the estimated retirement income from the member’s latest annual benefit statement.
While this may provide a reasonable figure in many cases, we can all think of scenarios where providing last year’s statement could give a wildly inaccurate picture of what we now know to be true. The most obvious is where someone has left the scheme since the last statement, so future accrual assumed in the statement simply won’t happen.
Other scenarios such as a transfer out or in, a pay rise, a significant contribution increase or decrease, taking part of your benefits, or a significant market movement, could all mean last year’s statement doesn’t provide a dependable view of prospective income in retirement. And does this mean a new joiner won’t see their value on the dashboard for up to a year?
Using the annual benefit statement should provide some consistency around projected benefits, although money purchase pension schemes may use different rates of return for even the same asset class, meaning that a higher projection won’t necessarily mean the scheme is delivering better value.
As a provider of modern pension schemes our customers are used to accessing apps that provide the real time position of their pension benefits, with the ability to model their retirement income at different dates and with different assumptions.
The challenge for dashboards is greater, they need to deal with the full range of UK pensions, but modern provider provision may drive consumer expectations.
The use of last year’s benefit statement might be valid where real time solutions can’t be delivered. If the pension scheme administrator/trustee is aware that an SMPI could be misleading for a customer, being able to show a nil return might be better than something that could undermine confidence in the numbers provided.
But where real time data can be provided, regulators should perhaps think about mandating that requirement. Over time the number of schemes that can’t provide accurate data will decline, and we can move forward with the kind of interactive dashboard experience people need to help them plan for the future.
If we start with too much of a compromise, the consumer’s experience, and the dashboard’s utility, could be lacking from the outset.
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