But perhaps the tide is
turning: the Government has now recognised that it is in the national interest
to redress the balance in favour of the consumer. In his last Budget
speech, George Osborne, the chancellor, stated that the government will
ensure the industry designs, funds and launches a pensions dashboard by 2019.
Subsequently, Harriett Baldwin MP (then Economic Secretary and City minister)
became the dashboard's ministerial champion, but July's reshuffle saw her
depart the Treasury. An announcement concerning her replacement is
expected shortly.
The ultimate disruptor?
The dashboard could provide more financial advantages to consumers than any
previous pensions initiative. Fully functioning, it could become the
ultimate disruptor of incumbent industry providers because, by offering
consumers a simple overview of all of their pension pots, it could break the
industry's cultural attachment to a lack of transparency.
Utility: crucial
Merely providing information will not embed the dashboard into the
consciousness of the public. To spur individual action and unlock its
huge potential, it must demand engagement by offering utility through, for
example, the ability to consolidate disparate pots into one place. This
would improve individuals' bargaining power with
the industry, leading to larger retirement incomes via lower costs and other
scale economies.
Utility, allied with enhanced transparency to counter the industry's innate
talent to complicate, would also help drive competition, kindling trust between
the industry and consumers. Ultimately this would encourage more
people to save more, helping to close the savings gap, to the benefit of the
individual, UK plc and the industry.
Delivery: a risky strategy?
An air of politically accommodating ambiguity surrounds the dashboard's
development, particularly in respect of accountability and
responsibility. The government, having chosen to steer the boat rather
than row it, is performing a delicate ballet, seeking to nudge the industry to
lead.
This is at odds with international experience of what is required to realise a
successful dashboard. Australia, Denmark, the Netherlands and Sweden all
used legislation to shove, rather than nudge, the industry into taking part,
particularly to compel data submission to the dashboard. But the UK
government's strategy is understandable given its chastening experiences with
IT-centric projects. It has also given the industry an opportunity to
shape its own destiny.
This could induce a dose of business schizophrenia among a minority within the
industry: a fully functioning dashboard would highlight poorly performing,
high-charging providers. They could choose to play chicken with the
government, by prevaricating in perpetuity. Consequently, given the
absence of any legislated "driving imperative" or formal contractual
arrangements with the industry, the top priority for the dashboard's next
(ministerial?) champion should be to establish an independent governing
board. Its purpose would be to keep the melee of project participants and
stakeholders moving forwards, thereby helping to ensure delivery.
Just the beginning
A pensions dashboard should be merely the first step towards a comprehensive
dashboard to display all facets of our personal finances. It should
display bank balances, savings accounts and investments alongside liabilities
so that, for example, users would be a mouse click away from offsetting
high-cost credit card overdrafts and consumer loans against any positive cash
balances (today yielding next to nothing). Consumers would be able,
therefore, to improve dramatically the return on their assets, by dis-intermediating
the retail financial services industry, much of which, arguably, we do not
need. Indeed, the case could be made that it is one of the underlying
causes of the UK's poor productivity growth.
This article first appeared in Financial World, August / September 2016.
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The Pensions Dashboard: maintain the momentum
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Post Date: September 12th, 2016