This week The Times reported that ministers want to “kill off” the idea of an online dashboard to help people keep track of their pensions.
The TUC hasn’t been the biggest champion of this project, which aims to let savers see all their retirement savings in one place.
In our view, the claims that it would transform how savers behave were overblown, and there are other initiatives that could better serve the public.
We were also concerned that the pensions industry would use the opportunity to lure savers into shifting their money into expensive products.
Yet after this week’s howls of outrage from the pensions and investment sector, there’s now a risk that the government will simply tell the industry that if it wants dashboards, it will have to build them itself.
This would run counter to the clear preference of consumer groups for a non-commercial government-backed offering, as research by the pension dashboard champions shows.
And there are several reasons why the withdrawal of the government from the dashboard project could also hurt savers:
The state pension is the bulk of most people’s retirement income. Without knowledge of how much this is likely to be, other information is likely to be meaningless.
Also, large numbers of people are, or have been, public sector workers. So the absence of information from public sector schemes would create a huge gap, even though much of the data held by these schemes is hopelessly inaccurate. Their participation would therefore require a significant injection of funds as well.
Having a dashboard underpinned by legislation and administered by the government or government agency would help to establish trust in the system.
Lack of trust can drive poor decision-making, such as cashing in a significant pension pot in early old age.
Allowing commercial providers to operate their own dashboards without a robust set of rules and governance in place would risk another mis-selling scandal.
To manage the enormous potential for conflicts of interest within commercially-run dashboards would require complex consumer protection or a new set of governance arrangements. It’s surely better to develop a single publicly supported dashboard then attempt a bodge job to work around these issues.
The idea that a dashboard is the key answer to pensions engagement remains fanciful. Pension saving can involve very complex issues such as thinking about how long one might live or how to invest the money. Combine this with human traits, such as valuing the present more than the future, and it is no surprise that most people react to the situation by pursuing the path of least resistance. It is the job of pensions policy to ensure that they still get good outcomes.
Nevertheless, making it easier to interact with pension saving is a good thing. Demystifying and simplifying the savings process makes it more likely that savers understand what they are likely to receive in retirement and can act on that basis.
Safeguarding this has to be job of government. It cannot be outsourced.
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