There are examples of nascent or obsolete technologies all around us.
Some are ridiculed (think Sinclair C5), while others are lovingly preserved (anything that runs on steam). For each of these there is a pivotal moment when a technology gets an edge or is overtaken by events.
It seems to me that we might be at that point with financial data and the pension dashboard.
I can hear readers yelling at Siri, Alexa or Google to send round the men in white coats. But can you hold that thought while I justify my position.
There’s an app for that
AJ Bell has just provided APIs that open up its direct to customer functionality to any developer to incorporate in their app. Open banking has required banks to do the same and there is a burgeoning market in data aggregation – think Yodlee, Bud, Bean, Wallet, Money Trees, Mint, YNAB or any of the others vying in that market.
So, if you know where your accounts are there is someone who will already aggregate them and these services are likely to become the norm over the coming years.
To consider where the pension dashboard fits with this, I think it is helpful to think of the population in three groups:
(a) Those engaged with their pensions and other savings
(b) Those who know where all their savings are but are not engaged
(c) Those who have lost touch with some of their pensions and savings
The dashboard doesn’t make a difference for group (a), if they are engaged with their savings the dashboard is just another aggregator among lots of others.
The dashboard would arguably help group (b) and (c) as the Single Financial Guidance Body would point people in those groups to the dashboard.
But would it? Consider John. He’s forgotten the six months’ savings when he was just out of university. That six months’ earnings were good as he went round the world on the proceeds but he also left £1,000 in his employer’s default pension scheme.
Ten years on the employer has been through three amalgamations and John has no idea what it is now called. He and his parents have also moved twice. The final thing John has forgotten is that he used his twin brothers’ National Insurance number when he started the job.
In the dashboard world the provider is polled for John Smith AB123456C and the provider holds John Smith AB123457C. The provider doesn’t match John. John and his asset stay separated.
This may sound like an extreme example, but it is based on a real example. We should not underestimate the number of inaccuracies that exist in technology systems whether that be through human error or multiple system migrations as corporates merge, separate and merge again.
Assets reunited
In a world with aggregators, maybe we need to put people in touch with their assets as a precursor to building aggregators?
So how about defining what we mean by people being in touch with assets. Let’s say someone is in touch with their assets if:
1. They have a financial adviser
2. They have phoned, e-mailed, written or logged-in within the last year
Then we can require those with custody of assets (not just pensions) to contact people who are not in touch with their assets as per the definition above. Where there is no response, the person’s details are passed on to a central tracing agency where the scheme says I have John Smith AB123457C who hasn’t been in touch. The central agency looks at its records, sorts out James and John and their contact details and communicates these back to the scheme.
The central tracing agency could be the government, both DWP and especially HM Revenue & Customs have the ability to trace as they do this with PAYE from employers.
Ultimately, aggregators of assets will stand or fall on the quality of the data and the trust in the provider. A joint industry/government dashboard ought to provide the latter. But we also need a process for identifying and reuniting lost assets with their owners. Otherwise the time and money than building a dashboard might go to waste as the press stories start to drip out of people being misled by the dashboard.
There won’t be many but tech savvy people in group (a) will be quick to twig that the dashboard has attributed someone else’s pension or missed out a pension and they take to social media and someone will submit a Freedom of Information request. You can guess the rest!
While this fuss is going on, those people who have forgotten their auto-enrolment and whose identity details are wrong will not be reunited with their pension.
I’m not sure what we’re trying to fix here; both the dashboard and pot follows member are worthy aims but without a tracing service will data quality leach away their foundations? Should we not first be trying to reunite people with their assets?
Just a thought.
Peter Hopkins is technical director at AJ Bell