After an interminable delay and reports the project could be consigned to the political rubbish bin altogether, the government has finally committed to delivering pensions dashboards last year.
Pensions minister Guy Opperman deserves credit for steering this genuinely positive step in improving member engagement, even through the choppiest of political waters.
In these times, getting reforms through Parliament must feel a bit like ice skating up a hill, even if they are well backed.
However, those hoping for an immediate retirement revolution might need to rein in their expectations.
With Brexit creating a legislative logjam, Opperman could only bring in rules forcing schemes to provide member data ‘as soon as Parliamentary time allows’ (a recent addition to the long list of meaningless political phrases).
Even then, Opperman admits moving to full coverage so everyone can see all their retirement pots in one place will take ‘three to four years’. In practice, this means the early rollout of the dashboard will be extremely limited.
While modern platforms and pension providers competing for new customers will want to get involved, older schemes operating on outdated technology will need a kick up the backside.
In the age of instant online banking, people have high expectations of financial companies. A half-baked dashboard risks being discredited from the start. The explanation of these limitations to savers will be absolutely critical in determining the project’s ultimate success or failure.
The biggest danger is people making poor decisions based on incomplete information. This situation must be avoided, or the long-term damage to individuals and trust in pensions generally could be huge.
The presentation of information will also be critical in ensuring those who use dashboards are spurred to action. Ideally, pensions should not just be shown as pots of money but also converted into legible retirement income estimates clients can relate to.
It would also be extremely useful for details of costs and charges to be made visibly prominent, putting clear blue water between those offering value for money and those charging savers through the nose. However, such developments might be a little ambitious for the time being.
Aside from the mechanics, the dashboard project presents a golden opportunity to reimagine retirement communications.
We are moving towards a system in which savers will be able to see all their pensions in one place, online, rather than being presented with pages and pages of documentation, endless risks warnings and incomprehensible key features illustrations.
This should become the simple model upon which all retirement communications are based.
Keep it simple
The government clearly buys into the need for better member engagement and is pressing on with pilots of ‘mid-life MOTs’ designed to get people to think about retirement earlier in their careers.
The Pensions and Lifetime Savings Association is developing a simple two-page statement for members, which will focus on providing useful information that can be easily understood.
The Financial Conduct Authority is also finally taking the issue of member communications seriously, with a recent article suggesting giving people excessive risk warnings might not help in alerting them to genuine risks.
‘Overproliferation of examples can lead to “warning fatigue” and an inability to identify the highest risk options,’ the article states.
Although the agreement to the need for simplified pension communications is viewed with optimism, the danger is different bodies will either develop proposals in silos or simply layer extra requirements on top of existing ones. Only a proper root-and-branch review of all retirement communications – such as Key Financial Indicators or pensions illustrations – can hope to achieve the radical simplification savers so desperately need.
Tom Selby is a senior analyst at AJ Bell