Rachel Vahey looks at the progress of the pensions dashboard project which she says is taking a while to materialise but should be worth the wait...
The wheels of the pensions dashboards don’t half grind slowly. We recently got news that 2023 is the intended start date for big ‘simple’ pension schemes to onboard, but 2025 is the date for the small ‘complicated’ ones.
That will make it six years after the Department for Work and Pensions' (undoubtedly hasty) promise to launch dashboards by 2019.
Most advisers’ reaction to chat about pensions dashboards falls into the ‘meh’ category. There is no doubt it will prove useful for clients and advisers alike in tracking down lost pension schemes. But it is certainly failing to set hearts alight.
The Pensions Dashboards Programme (PDP) recently issued an update. It’s on track with its programme and has now started the procurement process for a contract to build the digital architecture. It will also shortly start a separate procurement for the identity service (which will verify dashboard users).
The data standards are more or less sorted. The PDP know what they will ask people to input and also what information they will give out. This will include details of the pension scheme plus an estimated retirement income. There is still some discussion about this, and PDP will publish a retirement income guidance update this summer. But it’s looking like it will reflect the information given on annual statements. However, an estimated annuity income will be of little use to those intending to take drawdown.
It’s interesting to note the dashboards will only give information on uncrystallised funds. On one level this makes sense. After all, in its first guise the dashboards are a glorified pension finder. It makes sense that if you are taking benefits from a pension scheme then you don’t need to track it down. However, this approach disregards how fundamentally defined contribution plans have changed in the last six years.
Since pensions freedoms, some clients don’t compartmentalise their SIPPs into crystallised and uncrystallised funds. Instead, they have one pot of money, out of which they may have taken some tax-free cash, may have some more to take, and can take some taxable income as well, sometimes as a regular stream, sometimes as one-off payments. The dashboards won’t reflect that though; they will only throw back the value of uncrystallised funds and undoubtedly confuse those who were expecting a much bigger number.
The PDP is asking for input on the onboarding timetable. It would like personal pensions to go first in Spring 2023. Presumably, this is because they are ‘low-hanging fruit’ and an easier prospect. However, it’s ironic that most personal pension customers probably know what pension pots they have and roughly how much they are worth. It’s the smaller, more obscure pension schemes they are in the dark about – but these won’t onboard until possibly two years later.
Despite these points, I am a fan of pensions dashboards. I think they are needed and will help many people to track down their savings and hopefully engage more with their later income planning.
But this isn’t a quick or easy task, and it’s going to be another two years at least until we see them in action, and another four until we get all schemes onboard.
Rachel Vahey is senior technical consultant at AJ Bell