Yvonne Braun, Director, Long Term Savings PolicyAnyone looking back in a decade or more will view this decade as the turning point where technology, powered by low-cost computing, began to reshape everything around us. We have cars that drive themselves, robots running markets and mobile phones that double as translators and bank accounts. They would see the present as the moment where time refused to stand still - that is until they looked at how people engaged with their retirement income.
Even today customers are generally forced to scrabble around with paper statements and a varied set of online tools just to piece together the basics: “how much have I got and where can I find it?”
Without easily accessible answers to these fundamental questions for both personal and State Pensions, our industry will struggle to encourage engagement and incentivise savings to the levels needed by society. The Department for Work and Pensions estimates that, on average, people will have eleven different pension pots as they approach retirement.
Currently, pulling these together alongside the State Pension to establish what income can be obtained is a herculean task – even for industry professionals. This fragmentation, which is the result of high levels of employment mobility, automatic enrolment and the long-term nature of pensions, can lead to a disconnect. Without a full picture of our retirement savings in our pockets, pensions will remain an intangible asset that people struggle to value.
Part of the solution lies in harnessing the technology that is powering the digital revolution. In December 2014, on the back of successful international evidence, the FCA recommended the creation of a ‘Pensions Dashboard’ to boost engagement, by enabling anyone with an internet connection to pull together information about their state and private pensions in an online portal.
The ABI has been supportive of the Pensions Dashboard concept, having discussed the benefits of a ‘virtual aggregator’ back in 2012, as an important step to bridge the savings gap. It could help with financial decisions, and make the process for advice or a Pension Wise appointment more efficient. It could also help explain the connection with the New State Pension and what happens for periods spent contracted out. Judging by the high demand on the Pension Wise website (now above 2 million visits), we can infer that people want to be able to view information about their retirement savings as easily as they order takeaway, check flights or manage their bank account.
This needs to be part of a wider strategy to engage customers much earlier, and requires a partnership between industry, regulators and Government. As the KPMG report published today highlights, an over-arching strategy for delivering infrastructure projects like this will enable a more effective market.
Information technology has not changed society by creating a whole new set of behaviours: it has just made tasks simpler and more visible. People shared photographs before Facebook, and hailed a cab by hand, rather than GPS. Technology has simply increased the transparency, efficiency and, fundamentally, the convenience to the consumer. Sectors that have embraced this have been rewarded with more engagement and enthusiasm. We need to learn from other sectors and leverage technology to provoke engagement and secure long-term savings for the future.
Yvonne Braun is, Director, Long Term Savings Policy at the ABI
We will be discussing Pensions Dashboard, along with many other issues, at our Transforming Long-Term Savings Conference on 19 April 2016.