The pensions dashboard project appears to be regaining momentum of late. The Money and Pension Service (MaPS) dashboard itself is in the alpha phase and testing end-to-end journeys and the Department for Work and Pensions (DWP) and Financial Conduct Authority (FCA) have both opened and closed their consultations on the draft regulations.
The largest defined contribution (DC) schemes, master trusts and FCA-regulated pension providers are expected to start ‘staging’ from April 2023, with a proposed deadline of 30th June 2023.
This will increase the amount of assets under advice from existing advice clients, as well as increase the number of people seeking advice
But what does this mean for advisers and what should we be doing over the next year to prepare for the arrival of the pensions dashboard?
Lost pension pots
It’s well established that many consumers have lost track of their pension pots. In 2018, the Pensions Policy Institute found that more than 6.6 million people in the UK knew that they had ‘lost’ at least one pension pot.
Since these are people that are aware of a lost pension, we can assume that the true number of lost pots is likely to be much higher. Even where pots are not lost, the FCA’s Financial Lives survey indicated that few people know the value of their pension or have checked it in the last 12 months.
The likely result of the dashboard becoming available is that UK consumers will be able to find pension pots they had forgotten about or lost access to and regain control of these pots of money.
Some clients will have done the leg-work for you, but I’m sure others will require you to do all the searching on their behalf
This will increase the amount of assets under advice from existing advice clients, as well as increase the number of people seeking advice.
Being able to offer an efficient, low cost and robust advice service will ensure that you can pick up some of the new business coming to market and retain those who are already a customer.
Trusted advisers
Initially, the MaPS pensions dashboard will only be able to find and display benefits not yet in payment, showing both accrued and projected pension values, calculated in accordance with SMPI, with the aim of supporting better retirement planning.
Pension consolidation itself will remain a manual task as the initial release of the dashboard is not expected to allow any actions to be taken within it
Although other dashboards will become available over time, a key feature of the MaPS dashboard is the ability to allow a trusted adviser to access the details of these benefits on behalf of the user, so getting to grips with how the MaPS dashboard functions will be an important part of the journey to incorporating the dashboard into your daily work.
Some clients will have done the leg-work for you, but I’m sure others will require you to do all the searching on their behalf.
However the matching happens, as an adviser you’ll need to be able to react quickly to clients’ requests for reviews and recommendations based on their now increased pot of money.
Advisers will need to be efficient at accessing the dashboard, performing searches and gaining the information required in order to assess the risk profile and charging structure of lost products compared to their existing managed portfolio.
This will help to identify where pension consolidations or switches would be useful. Ensuring advisers know their way around their current technology will be vital, while setting up templated reports will help ensure that the advice you’re giving is robust, efficient and appropriate.
Pension consolidation itself will remain a manual task as the initial release of the dashboard is not expected to allow any actions to be taken within it.
An efficient, low cost and robust advice service will ensure that you can pick up some of the new business coming to market
However, in line with Australia’s rollout of pensions dashboards, this functionality is proposed for the future, which should reduce administration efforts and help ensure cohesive portfolios at the click of a button.
Equally, in a world of stochastic modelling you won’t want to rely on SPMI projections to guide your clients’ retirement plans. Instead, you’ll need technology that can allow you to quickly add these missing pots of money into cashflow tools and put the money to work to ensure that a clients’ financial journey remains on track.
The pensions dashboard opens up real opportunities for financial advisers, with technology inevitably at the forefront of the charge to offer good value financial advice to more people. Those firms that start planning now will have a real head start when it comes to the future of financial advice.
Steph Willcox is head of actuarial Implementation at Dynamic Planner
The work involved in advising (properly) on whether or not to consolidate is laborious, time consuming and therefore incurs costs which, in many cases, are disproportionate relative to the value of each pension pot, so (in my experience) policyholders simply aren’t prepared to pay them.
PensionBee has had a crack at streamlining the (consolidation, but not advice) process as far as possible, but troubling questions remain as to the impact of exit penalties on legacy contracts or what benefits (such as GAR’s or long standing WP investments) customers may be giving up without realising their value.
Some commentators have suggested that PensionBee’s service is aimed primarily at people who hold post stakeholder contracts, though I suspect that many thousands (perhaps many more) of pre-stakeholder contracts still get swept up in the dash to “have everything in one place”.
Oh goody …
The pensions dashboard will be arriving on platform 2 on time.
The scammers and feckless will be waiting for it arrival and greeting the passenger’s with open arms.
All aboard the “great pension robbery” is already happening, and about to get a welcomed nitrous oxide boost.
I’m sorry but I cannot condone this, its the biggest sales aid I have yet come across.
Knowing what we know now, would J Robert Oppenhiemer turned his attentions to a less destructive invention ?
Then maybe there was a (metaphorical) gun held to his head ?