Large schemes will have to share data with Dashboards by next year, but savers in smaller schemes face long wait.
I’m a big fan of the idea for a Pension Dashboard, which brings together the information around each and every pension we have as individuals, because I genuinely think it has the potential to improve the way we save for our retirement.
At the moment, there’s a big risk of people losing track of the pensions they have.
The days of having a single job for life are long gone, with research now suggesting that today’s workers will likely have 11 different jobs over their lifetime.
Given the requirements for employers to open and contribute towards workplace pensions for their staff, the fact that we switch jobs so often means that by the time we come to retire we are likely to have a host of different pensions.
Keeping track of those pensions during our working life, and then tapping into them when we retire, is not easy currently, and all too often a pension or two slips through the cracks.
That’s a potentially costly situation, leaving you to get by throughout retirement on less than you’ve actually saved.
How the Pension Dashboards will work
The Department for Work and Pensions (DWP) has now published initial rules for how the Dashboards will operate, and it’s important to recognise that there won’t be a single Dashboard here.
While one will be set up by The Money and Pensions Service (MaPS), there will also likely be commercial rivals. The rules published by the DWP essentially set out how various forms of Dashboard need to work.
According to the draft rules, savers will be able to share some initial data about themselves, and it will then be down to the schemes to return data for that individual.
That way you’ll then be able to check-in and get full information on the various pensions you have in your name, like the value and any additional benefits that come with those schemes.
Dashboards on the horizon
Unfortunately, actually getting the Dashboards up and running has been a lengthy process.
Despite years of talk about how they can work, and the potential benefits, we still don’t have any in place and this latest consultation from the Government makes clear that we have still longer to wait.
Under the new plans, pension schemes will join the Dashboard architecture in stages, based on size. Large schemes will join between April 2023 and September 2024, with medium-sized schemes joining from October 2024 to October 2025.
Small and micro schemes are then anticipated to join from 2026.
It’s a model that makes sense – and is not all that dissimilar from the way that the auto enrolment scheme was initially introduced.
However, it is still discouraging that millions of savers who have their money locked up in schemes classified as small or even micro will be waiting another four years before they get to enjoy the benefits of a pensions Dashboard.
And that’s assuming there are no further hitches or delays, which strikes me as rather a dangerous assumption to make.
What about the State Pension?
While the State Pension is unlikely to be enough to provide for a comfortable retirement (particularly by the point I can afford to retire) it is nonetheless a crucial aspect of pension planning for many of us.
That extra money on top of what we save privately can make a huge difference to our standard of retirement.
Crucially, the rules set out by the DWP make clear that information about an individual’s State Pension entitlement will be included from day one of the Dashboards going live.
This will include their State Pension age, and what they may get at that point, based on their current National Insurance record.
If it’s below the maximum, savers will then have the option of making voluntary additional contributions so that they increase the size of the State Pension they eventually receive.
We can’t afford any more delays
It’s really encouraging that the Government has now set out rules covering the Dashboards, and a timetable for having the systems up and running.
The reality is that we have a host of people approaching retirement right now who are less well prepared for what’s to come than they should be, precisely because of the constant stream of delays that have held up reaching this point.
Put simply, we cannot afford any more delays to the pensions dashboards ‒ they need to be a live and going concern as soon as possible.
But timing isn’t the only challenge here. You only get one chance to make a first impression, which is why the pressure is now on to ensure that when they do go public, they are as comprehensive and useful as possible.
If instead there are huge gaps in data, or users simply aren’t provided with what they need in order to make better choices for their retirement ahead, then a huge opportunity will have been missed.