As industry continues preparing for pensions dashboards, it’s worth revisiting why this work is being undertaken with the Government and regulators.
Lack of engagement with pensions
Most people in the UK build up a State Pension and private pension pots over their working lives. Thanks to automatic enrolment, over 10 million have been saving into a workplace pension by default. Yet, around 12 million people are still estimated to be under-saving for later life.
The evidence shows that consumers are not as engaged with their pensions as they could be. The Pensions Dashboards Programme (PDP) carried out research in 2022 which found most adults (55%) undertook no pension engagement activities over the last year. As part of ABI research from 2021, the majority of respondents expressed a view that it is difficult for people to get access to information on their pensions.
Building on a wealth of existing evidence around barriers to engagement, the Department for Work and Pensions (DWP) has identified problems of understanding and motivation to proactively seek information on their retirement savings. Research from January 2023 on engagement with workplace pensions highlighted people feeling a lack of ownership of their pensions and concern about making decisions that could lead to financial loss.
Bringing information together in one place
The Government has committed to delivering dashboards that will allow individuals to view all their pensions information, including the State Pension, together in one secure place. The goals behind dashboards are to:
- increase individual awareness and understanding of pensions information and estimated retirement income
- build a greater sense of control and ownership over pensions
- increase engagement
- support the advice and guidance process by enabling people to access pensions information at a time of their choosing
- reconnect people with ‘lost’ pension pots
Having a comprehensive overview of their pensions savings could make it easier for consumers to plan for retirement and make more informed decisions. The ABI’s 2021 research found that 56% of respondents agreed that it would be helpful to have all the information on their pension pots in one place. Similarly, PDP has found that estimated retirement income is the most important information that consumers want to see about their pension.
People will also benefit from dashboards providing details of pension pots that have been forgotten about, or where a person has lost touch with their pension provider or scheme because they have moved home, for example. The Pensions Policy Institute estimates that 2.8 million pots are not currently matched to their owner, with a total value of £26.6 billion.
Dashboards also present a real opportunity to industry. Pension providers and schemes will have opportunities to engage with customers and members who have a better understanding of their retirement savings.