In 2002, the government published a Green Paper on working and saving for retirement. As well as laying the foundations for Auto Enrolment, it also included the first reference to an online retirement planner where people could see all their pensions in one place with an estimate of the income they were likely to receive in retirement. Over 20 years later, and after several false starts, it seemed in early 2023 as though we were finally on the brink of real, live pension dashboards with the first schemes scheduled to connect to the new ecosystem from April 2023.
It wasn’t a moment too soon either. With over 10 million new pension scheme members added since the advent of Auto Enrolment (AE) in 2012, there are now almost 50M pension pots in the UK. And, with an average of 12 jobs over an adult lifetime, that number is only set to grow. In 2019 over 1M UK citizens retired so we can expect a lot of network traffic over the new dashboard infrastructure – we estimate there could be 100,000 hits on the dashboard service every day.
The good news is there are a number of firms who have developed systems to handle all this traffic and the competition between them should be good for both performance and cost. But why, you might ask, did it take so long? In a world where every month seems to herald some new achievement for artificial intelligence, robotics, or quantum computing, how come it took 20 years to develop a pension dashboard for the UK?
Ironically, it’s the very thing that will underpin the success of dashboards, which has also made progress so painfully slow; data standards. Almost by definition, innovative new technology is unencumbered by the past. Data standards on the other hand, particularly for pensions, are all about dealing with history and its arcane, complex variations. Agreeing on a common approach to cover scores of systems used by hundreds of companies administering thousands of schemes and millions of policies dating back decades is an enormous challenge.
And so we come to the hitch in this happy story. In the last month, the government has delayed the implementation of those much-needed pensions dashboards. The hold-up is linked to the delay in publication of the data and technical standards that I’ve discussed above, along with the technical infrastructure to support them.
So, should we despair about whether we can ever get those 50m pension pots onto one interface? Will the dashboard ever launch, and will it be worth the effort when it does arrive?
The answer is dull but straightforward. Simply, yes. This is a hard road, and we’ve hit a bump. But that doesn’t mean that this isn’t a challenge worth tackling for the sake of millions of ordinary people who will need every penny they can get in retirement. By agreeing on one common standard for all pension schemes of whatever type, the Pension Dashboard Programme (PDP) will, eventually, ensure that no stone is left unturned when connecting pensioners to the savings they have spent a lifetime accumulating. And by connecting such a huge number of schemes, PDP has also created a marketplace large enough to attract multiple technology suppliers, including Equisoft. That means commercial competition, which is good for pension schemes and good for consumers.
In time, as with most successful standards, the delays, the huge effort, and the long time spent on developing the PDP infrastructure will eventually be forgotten and, like the Internet and electricity, we will take it for granted and build new services on top. In the US Equisoft, has been part of a similar story where ACORD insurance standards, which started in 1970, took decades to really take off. Along with competing software suppliers, our insurance systems now happily process a good proportion of the 275M electronic transaction messages which flow between ACORD members annually. When it comes to people’s money, slow, steady progress may be just what is needed.