Older pension schemes need to up their game to ensure the Pensions Dashboard actually delivers.
This should be an exciting year for pension savers.
The Pensions Dashboard may finally launch, which is an excellent initiative aimed at giving people a far greater handle on how their pension saving is going, and what sort of pot they can expect in retirement.
The idea of the dashboard is that users can log on, and in a single place, see the value of their various pensions.
This is incredibly valuable.
The days of working for a single employer for your entire career are over for many of us.
And with the auto-enrolment scheme requiring employers to open, and contribute to, workplace pensions on behalf of their staff, it’s going to be awfully easy to accrue a handful of different pensions over a single working life.
Keeping track of all of those, without consolidating them, is easier said than done, which is why the Pensions Dashboard is such a good idea.
It’s been a long time coming too, as the Pensions Dashboard was first announced way back in 2016 by then-Chancellor George Osborne.
The trouble is that it seems, at launch, it won’t be fit for purpose.
Not getting the whole picture
A new report from pensions firm PensionBee suggests that when the Pensions Dashboard launches savers will only be able to see around 61% of their various pensions on average.
PensionBee analysed data from the instances where it was required to contact a pension provider, in search of a customer’s pension, between July and November last year.
In total, that was more than 6,500 instances, so it’s a pretty good data set.
It crunched the numbers on how many pensions could be matched on the first try, how many could be matched on partial identification, and how many couldn’t be matched despite the belief that a pension pot with that provider existed.
Less than two-thirds of pensions were found in their entirety, with around 13% partially found.
Unfortunately, one in four pensions aren’t showing up in any form. That’s so poor it threatens to completely undermine the value of the Pensions Dashboard project.
Finding our pensions
The eventual plan for the Pensions Dashboard is for digital ID to be used to identify a saver’s pension, but this is unlikely to be up and running in time for the initial launch.
In the meantime, PensionBee argued it is likely to use matching, which is how pension data is shared at the moment. Four key elements of data will be required – name, date of birth, National Insurance number, and the saver’s address.
But evidently there is a real difference in the quality of data held by pension schemes, with older contract-based schemes in particular performing poorly.
Barely half (52%) of pensions from these older schemes were found on the first try, with 64% either fully or partially identified and 36% unable to be identified at all.
Contrast that with newer master trusts, like the auto-enrolment providers NEST, NOW Pensions and Smart Pension.
A whopping 79% of these pensions were identified on the first try, with 94% either fully or partially identified and a paltry 6% unable to be identified at all.
A partial picture is no good at all
The Pensions Dashboard has the potential to significantly change the way that people engage with their existing pots and amend the way they save to ensure they end up with a comfortable retirement.
But it is only going to work if users get a full picture of their pension savings. A partial picture, encapsulating some, but not all, of our pensions isn’t going to be enough.
The older, legacy pension schemes need to treat this as a wake-up call.
In this day and age of high-level data sharing, it’s really not good enough that they should struggle to provide such basic information about their pension savers.
PensionBee reckons that “drastic data cleansing actions” are needed by those older pension schemes, and it’s difficult to argue with that.
The newer master trusts have shown that it’s perfectly possible to keep quality, accurate data on pension savers.
Now it’s time for the rest of the market to follow suit and ensure that pension savers benefit fully from the Pensions Dashboard when it eventually launches.
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