Pensions Go Grey!
The pension reforms announced in George Osborne’s 2014 Budget gave savers new freedoms.
They marked the end of a paternalistic system, where the government dictated how your money was used in retirement, and completed a shift in responsibility for pension savings and retirement income from the state and the employer to the individual.
This, however, comes with risk and complexity. With the move from final salary to defined contribution schemes, employees and not employers bear investment and longevity risks. The end of compulsory annuitisation means that people can choose to cash in their pension pot, invest their money in funds, or stick with annuities. Auto-enrolment and job mobility mean that, on average, you could end up with 11 different pension pots, according to the Department for Work and Pensions. We need a step change, therefore, in the support available to help people navigate their way through a minefield of complex products and choices.
Technology will have an essential role, an app that can provide a picture of your own savings and pensions, with forecast income and options on taxation is needed. To make this happen a simple data model to be used by every financial supplier is required so that a clear picture can emerge for an individual.
In a paper published last month by Mark Hoban MP with the think tank Reform a Retirement Saver Service is proposed. This is already happening across Europe. Minpension is an online service that all Swedes can use to track the value of their state and private pensions. The Pensions Dashboard helps the Dutch do the same thing. Here, banks can provide a snapshot of all your savings with them, and IFAs can do this for their clients.
Government will need to enforce a data standard for the Financial Services Industry and commit to upgrading their tax and state pension elements when the Treasury/HMRC change the rules! Then the FinTech industry can provide the app!