- Pension Reforms to help consumers seem consigned to the slow lane.
- Pensions Dashboards still 3 years away and measures to improve PensionWise take-up are too weak.
- Dashboard acceleration needs data reconciliation and standard statements.
- PensionWise ‘nudge’ won’t be a game-changer, auto-enrolment is needed to protect more people against scams.
Disappointingly slow pace of change for pensions: The Government has today unveiled the latest in its ongoing series of pension reforms, designed to improve the way pensions work for customers. I must admit to being disappointed at the slow pace of change and fear that increasing numbers of people will be at risk of losing their pensions to fraudsters, especially during the current Covid crisis.
Pensions Dashboards not now expected before 2023: Promises of a Pensions Dashboard for 2020 have been dashed. The Dashboard Delivery Project has released a new timeline which suggests only a ‘first version of data standards’ and specification of digital architecture will be ready this year. The project is still working on challenges of data security, identity verification and matching people with their pensions. In 2021, service standards and design will be developed with chosen suppliers and only in 2022 will the first volunteer pension providers be connected to any system. Compulsion on schemes to connect to the ‘dashboards ecosystem’ is not slated till after 2023.
Pension Schemes say they need time to prepare accurate data: The Government now admits that pension data is not in a fit state to be loaded onto a dashboard and that schemes still need at least two years to prepare. Five years after the dashboard was first promised, and despite many warnings of the data problems, pension providers and Regulators have made precious little progress on data accuracy checks or reconciliation requirements. The Dashboard project relies fundamentally on correct information being fed in.
Simpler standard statements are essential to customer understanding: The Government’s proposals for standardised easy-to-read annual pension statements are vital to help move the Dashboard project forward. If all pension providers are required to produce standardised information that can be loaded onto a dashboard when it is ready, then pension savers will be able to make better informed choices and plan their retirement income better.
DWP seems reluctant to ensure significantly improved take-up of the excellent PensionWise guidance service: The Government also announced today that it plans to consult on new regulations requiring pension providers to ‘nudge’ customers to use the free, impartial guidance service that has helped many people (though nowhere near enough) make better decisions and avoid scams. The aim is to make taking guidance ‘a natural part of the journey’ when savers make decisions about their pension pots. However, research for the DWP last year shows only a tiny improvement in take-up from just giving a nudge. Telling people about PensionWise does not do enough and leaves hundreds of thousands of people one their own, at the mercy of fraudsters and having to cope with complex pension decisions without knowing the risks.
Without help, most consumers cannot make informed choices: The Government’s stated goal is to ‘ensure people have the necessary support and information to make informed decisions’. It recognises that people need PensionWise guidance, to help customers navigate the complexities of pension rules and understand the risks, because once their funds are withdrawn it is too late. With hundreds of billions of pounds of taxpayer money having been contributed to pensions from tax relief, alongside individual and employer contributions, there is a wide societal interest in trying to help people make the most of their pension. Unfortunately, however, there are no targets for improving take-up of the help that can be vital to protect them.
Auto-enrolment into guidance would provide a significant boost to customer protection: PensionWise take-up is extremely low – only around one in ten savers use this excellent service and many have no idea what it is or how to access it. However, those who do, report extremely high satisfaction levels. it is clear that people will not book this kind of appointment themselves, but if pension scheme providers make an appointment for them, far more would benefit. Those considering taking money out of their pensions could be automatically enrolled into PensionWise as the ‘default option’ and research from Just Retirement found 90% of customers would not opt out of a guidance session that was booked for them. Yet, disappointingly, the Government has rejected this idea so far. I hope they will reconsider.
Urgent reforms are needed: Standardised annual statements, common data standards and more PensionWise would give customers clearer information and make better use of the pensions. These issues need to be addressed rapidly, not left in the slow lane.