Rumour has it the consumer will be at the heart of the Pensions Dashboard. Espoused benefits such as fewer unclaimed pensions have reinforced the notion leading to a consensus that the dashboard is desirable, even needed.
But there is cause for concern. This is because in underpinning development of the dashboard, Government expectations and guidelines suggest it is about strategy and policy.
One of the drivers for the dashboard is that it will allow users to readily see key information about their pensions in one place, such as their pot values. The belief is this will support better retirement planning. However, among other things, the dashboard will support the likelihood of commutation, whether in part or in full, for short-term need or want.
The commutation of pensions for short-term utility risks hindering workforce management and financial wellbeing in retirement, both already a concern following the introduction of the pension freedoms.
While doing its research, the National Employment Savings Trust (NEST) found that its younger members may stop saving if they see falls in the value of their pots. The dashboard will show pot values, so may give effect to similar parallels in other schemes. Moreover, to encourage continued saving, other schemes may follow NESTs example and upend investment convention by shortening the asset duration in their younger members’ default fund.
More generally, the dashboard will be in keeping with a Government pension strategy and policy that is inconsistent with economic stability. Rationale and empirical evidence from the US discerns that a shift towards financial-market-based pension arrangements exacerbates the effects of recession and increases economic volatility.
In essence, the current pension regime creates risk for businesses and consumers. This includes risk to workers’ finances and the certainty, security and, in many cases, the protection of their pension savings. It also implies a higher incidence of small pot and active member churn, thus increasing pension complexity, administration and cost.
In the same vein, there is a greater need for workers to monitor their pension savings. It also follows that as a medium for monitoring pension savings the dashboard may support an increase in the volatility of the economic cycle.
Engagement is also unlikely to be immune. The parallel with NEST is a case in point. Multiple dashboards will facilitate and broaden that further.
Therefore, as things stand, the dashboard will be an anachronism. Although sagacious design may help, fundamentally the consumer will not be at the heart of the dashboard until he/she is at the heart of Government pension strategy and policy. In this regard, the Pension Schemes Act 2021 will not be helpful
1 The Pensions Industry in One Word, Professional Pensions, May 2021
This article was featured in Pensions Aspects magazine July/Aug edition.
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