The concept of a pension dashboard was mentioned in the Queen’s speech in parliament yesterday. It’s a new innovation in the pensions and advice market by the Department for Work and Pensions, which needs a bit of further explanation.
Company pension schemes
The way we now work means that changing jobs is far more common than it was 20 or 30 years ago. We used to talk about ‘a job for life’, however now it is much more common to move employers several times throughout our careers.
This means that with each employer we work for we accumulate pension policies which often remain as they were until such a time as we are actively contemplating retirement. This means that there are no reviews on performance or charges applied whilst these pension policies slowly mature, and the investment portfolio for each fund is often still in the default fund of that provider.
Company pension schemes are always advisable as, as well as the employee contribution, employers will contribute towards to scheme, which can significantly increase the overall contribution being invested in each pension pot.
We often see clients who are looking for retirement advice as they approach state pension age. It’s not uncommon for people to have forgotten about certain pension schemes, being unsure whether they had a pension with each employer, or indeed where that fund resides.
If you’ve moved home you may have missed out on your annual statement from the scheme, and may have lost track of how much you have invested in each pension fund.
Understanding how much you have invested is a crucial first step in retirement planning, enabling your financial planner to forecast your retirement income and advise on an appropriate investment strategy.
The pension dashboard
The concept of a pension dashboard is to bring all these schemes together in one place so that it’s less likely that an individual will forget or lose track of any pensions in which they have investments. This is exactly what the industry and our clients have been asking for.
A pension dashboard will allow people to understand exactly how much they have saved during their lifetime and with whom. Where appropriate you would be able to combine policies sooner rather than later to match your attitude to risk and potentially reduce charges.
Will a pension dashboard work?
A dashboard for pensions is very much in line with government efforts to deliver routine services online – making tax digital and access to NHS services for example. We have also seen similar approaches in other sectors – notably open banking and open data in the energy industry, which allow consumers to view their data and make cross-market comparisons.
The main issue with a pension dashboard as always will be the IT infrastructure needed to obtain and manage the vast amount of information needed to provide this service. The initial and ongoing costs of IT development and maintenance could also be expensive and it would be a real shame if the State Pension isn’t also included in the pension dashboard. Nevertheless it would be a welcome innovation for the pension planning sector should this policy statement become reality.
Our advice, as always, is to speak to your chartered financial planner about your plans for retirement and seek their advice on any changes you intend to make to your pension schemes.
Nick Onslow, Independent Financial Adviser, The RU Group