Former pensions minister: Huge hurdles for dashboard ambitions
Former pensions minister Ros Altmann has criticised the state of pension record data in the wake of last week’s news that the government could scrap its much-vaunted pensions dashboard.
In a wide-ranging interview with AccountingWEB Altmann, who worked as Conservative pension minister from 2015 to 2016 and has recently been appointed chair of fintech firm pensionsync, called on the government and pension providers to agree on common standards and terminology and use technology to tackle the industry’s ongoing issues.
Dashboard ambitions won’t be met
Last week the Times reported that the government could scrap plans to create a pensions dashboard that would help millions of people to keep track of their pension pots. The news prompted a backlash from the pensions industry and consumer groups, and a petition asking work and pensions secretary Esther McVey not to drop the plans has so far been signed by 14,000 people.
However, according to Altmann, the news should not come as a big surprise to those that understand the state pension records are currently in, and what the cost of putting them right would be.
Old systems are disparate, unreliable and not standardised”
“We still don’t understand what the state of pension records is,” Altmann told AccountingWEB, “the government itself still hasn’t got its own public records accurate.
“The old systems are disparate, unreliable and not standardised. There are huge hurdles to put things onto a common platform.
“We saw recently all the problems with the so-called Guaranteed Minimum Pension, where the data was so wrong that people are now having their pensions cut. If the government itself can’t upload reliable data or be sure that it can, then it does seem to me that the ambition of the pensions dashboard won’t be met.
“At the moment unless things are standardised and you get everything away from manual input and make sure there are systems in place to check the accuracy of records, any dashboard for auto enrolment or defined contribution (DC) schemes, which I think are realistic possibilities, would be very difficult to achieve.”
No agreed standards or common terminology
Despite her obvious exasperation with the current state of pension records, Altmann expressed sympathy with the government around the pensions industry’s inability to collaborate and get its own house in order.
“Clearly with defined benefit (DB) schemes and the state pension there are legacy issues about accurate data records,” she said, “but with DC pensions, which should be much easier, the industry hasn’t been able to agree on common standards or even common terminology that would enable a dashboard to work.”
According to Altmann, the first step in tackling this issue is relatively simple: producing a one-page standard form that is a statement of what you have in your pension – something the FCA has recently said it wants to achieve.
Auto enrolment a success, but accuracy issues abound
A key player in the implementation of auto enrolment, Altmann believes that in spite of doubts about its effect on small businesses and the accuracy of the data, the scheme has achieved what it set out to.
“The vast majority of employers, even the smallest ones there was most doubt about, have pretty much complied,” she said,” which is an enormous success; we have so many more people saving in pensions.”
However, according to Altmann the regulator’s decision to concentrate solely on getting people onto auto enrolment rather than focus on the accuracy of the data continues to have repercussions to this day.
Pension providers need to do more"
“So far what you’ve had is the regulator desperate to get every employer to at least find a scheme, set it up and start making contributions. What they haven’t done, and it’s disappointing, is set up accuracy checks to make sure that the contributions going in are right.
“Basically [the regulator] says ‘members should check’ or pension providers should check. With the best will in the world, a member wouldn’t be able to know whether the money going in was right, even if they tried to look, because it’s pretty complicated.
“Accountants have a big responsibility and have done a great job in serving their clients, trying to get them onto auto enrolment, help them with its complexities etc., but we need to move on now and acknowledge that pensions are very expensive to administer, and they don’t need to be. There’s more that technology can do to make this a lot cheaper, more accurate and more secure.
“If we can sort some of this out then we can move forward with helping people have faith and trust in pensions and help employers. Pension providers need to do more.”
Altmann has recently taken up a new role as chair of pensionsync – a fintech pensions challenger she describes as a ‘hidden jewel’ of the industry.
Started three years ago by CEO Will Lovegrove, pensionsync has built a solution that automates pensions for employers of all sizes, and their platform connects most major pension providers with popular payroll firms.
“While the industry has been dithering about with the dashboard and faffing around trying to work out how it might work, pensionsync has just gone ahead and done it,” said Altmann.
“They’ve come in from outside the pensions world, and with their own risk capital gone ahead and set up a system that actually works in allowing pension data to integrate properly with payroll, cutting out most of the damaging manual data-handling risk that has plagued the industry for so long
“What we’re seeing is that people from inside the world of pensions and have been for a long time can’t think so much outside the box. They’re thinking about what they’ve got, rather than what else is out there elsewhere and how we can bring it in.”