The pensions industry has come under pressure this week after the FCA called for a swift introduction of a “Pensions Dashboard” – a one stop place where individuals can register and view all their pension savings online.

With that level of information in front of them, goes the argument, you can assess precisely where you are with your retirement plans and make informed choices about what to do with your assets.

Many industry commentators and experts have called this a ‘’no brainer’’ and it probably is, as far as the pension holder goes, but there are huge practical problems and perhaps significant financial risks for the pension providers themselves. Mark Soper explains……

As Ros Altmann herself has conceded, it ain’t going to happen any time soon in the format the FCA envisage – with the individual putting their name date of birth and insurance number in, and the pension providers doing the rest. Too many of them still don’t have their policies online, for beginners. Some of the other barriers are listed below.

She also ruled out any DWP funding for the scheme, and projected that it would be ten years or even more before it sees the light of day.

Of course everyone using the free Retire Easy LifePlan will know that the most important elements of the Pensions Dashboard are already available, the main difference being that individuals need to enter in their pension plans themselves.

The program even allows you to include other assets, such as one’s house, and see the impact of any number of different scenarios – for example, what would happen if you cash in a plan at any time in the future, delay your retirement or even take a world cruise. And you can see at a glance if your savings will actually fund your projected spending in retirement – allowing you to change tack well in time.

Investors Chronicle itself has described it as the ‘’Holy Grail of Retirement Planning’’, and more helpful features will be available later this spring with the introduction of a Premium Version – including regularly updated valuations on funds.

So why will it take the industry up to ten years to get its act together and generate its own dashboard?

Data Procurement

This is a significant challenge as many types of legacy pension arrangement out there, for example, a pension plan issued, say, in 1992 by Provident Mutual who were acquired in 1996 by General Accident and then merged with Commercial Union to become CGU, to be subsequently acquired by Norwich Union who re-branded to AVIVA – get the picture!

It is not surprising that the details of most of Provident Mutual’s book remains offline today and this is just one example – it would be a mammoth task to get all legacy pension plans up to a standard where current and future values could be accessed using a central online dashboard.

There could be some long-term cost savings for the providers if the pensions dashboard replaced the mountains of paper and associated administration costs of issuing pension valuation statements and retirement projections but there is no doubt that significant additional investment in the providers IT systems will be required.

Accuracy

Recent research by the Regulator into pension exit charges not only revealed the extent of these charges (which it intends to cap) but also the inability of some providers to calculate an individual’s pension fund with any degree of accuracy. The FCA has called for the Pensions Dashboard to electronically update an individual’s entire pension plan portfolio daily in real-time – this can only happen if the data feed from the providers is reliably accurate.

Pension Switching

For the providers, this perhaps is the largest ‘’elephant in the room’’ as individuals are likely to become more engaged viewing a ‘’total’’ fund’’ and will seek additional simplicity of their finances by consolidating the older and smaller pension pots into a single pension plan – the most likely recipient will be an individual’s current Workplace pension as this needs to remain open to accept ongoing contributions.

If an individual follows this course of action with restricted or no advice, financial detriment to the individual could possibly be very low as the ongoing pension charges levied on the latest Workplace pension plans will in many cases be much lower than the charges levied on older pension plans. Following the FCA’s drive to force providers to cut or abolish pension exit charges a key disincentive to switch or consolidate is removed.

Whilst this could be a ‘’win-win’’ for the individual pension plan holder, there is a real risk that any single provider could suffer a reduction of pension funds under management and/or an associated loss of income. This could be significant, particularly if the ability to switch pension funds from one plan to another became a feature of the new dashboard.

Lack of Provider Engagement

The FCA expect the first pension dashboard to be operative from the end of this decade and have handed the initiative to the providers to build it. There will be early adopters steering the dashboard but some providers may be less keen to fast-track its development in fear of pension switching working against them. Hopefully this will prove to be a short-term concern as any provider perceived as dragging its feet could be ‘’sin binned’’ and in turn could suffer a glut of transfers out as a result.

If lack of engagement becomes widespread, then watch out for FCA and Government intervention.

Meanwhile, avail yourself of the free RetireEasy LifePlan and see what the future holds for your retirement finances at www.retireeasy.co.uk