Opening the industry: Why the Pensions Dashboard is our 'Open Banking'
The banking landscape is about to change beyond all recognition. Many in the industry will be excited about the opportunities provided to empower consumers, liberalise data, increase regulatory focus and digitise the customer experience. And where’s this coming from? The Open Banking regulation.
In the pensions market, the Government’s Pensions Dashboard project will fulfil a similar role in shaking up the industry by providing better access and insights to consumers, and in forcing higher levels of innovation and customer service.
This is very important to the industry. Analysis of UK pension trends indicates that pensioners will receive £9 billion a year more from their private pensions and annuities in five years’ time. The projected rise in incomes overall may mean a greater complexity for those managing multiple pension pots.
Yet the Chartered Insurance Institute estimates that the total savings gap between the total amount of long term money saved, and the amount actually required for people to live at what they would deem a tolerable life, is currently around £9 trillion. There is also around £3 billion in pension pots that is currently going unclaimed by consumers who have simply forgotten about their pension entitlements.
For consumers, keeping track of pension savings has been a fragmented experience, and a barrier to effective personal financial management. As the pensions landscape evolves alongside demographic changes, factors like increasing longevity, lower guaranteed pensions, and rising consumer expectations are all part of a changing financial services outlook.
This is why many pensions providers are treating the Pensions Dashboard project as a real opportunity for upping service levels across the board.
With all 64 million pension pots brought under one roof, individuals will be able to see all their entitlements in one place, and compare their service and benefit levels. It would be naïve to believe that this won’t mean a realignment of consumer priorities. It’s set to take place in 2019, so the pensions industry has time some to plan and optimise the way it does business.
Getting ready It may be that as deadlines, standards, and mechanisms become clear, some providers may need to overhaul the way they record and manage their customer data. The Government would be remiss in not enforcing interoperable standards though legislation.
Pensions providers with outdated systems, or who know themselves to be remiss in their data governance, need to start on the path to understanding the Pensions Dashboard project and it’s likely impact on business operations sooner rather than later.
The Government hopes that, when live, the project will offer the industry reduced administration, increased competition on a level playing field, and greater clarity surrounding the provision and nature of long-term savings products, since consumers will be informed and more in control of their financial futures.
Open Pensions Economically we’re in somewhat uncertain times: the increases in interest rates and inflation puts increased pressure on both consumer and business finances.
It is inevitable that there will be market challenges as well as opportunities - that’s the nature of change. The regulatory environment will become more ‘interesting’ as GDPR takes hold in May 2018, colouring all industries managing personal data on behalf of customers.
In due course, the social landscape will shift too, as with more open data and increased digitisation customers and advocacy groups will bring more scrutiny to all industries.
Experian’s research into the attitudes of the public towards data sharing demonstrates that customers will willingly share their data when they see that it is valued and that they receive something in return: the value exchange.
So like the changes shaping the finance world due to Open Banking, the pensions industry likewise is moving to a model rather like that of insurers - where aggregators and comparison sites are used by customers to research prices and rates. And while the out and out winner overall should be the customer - it offers opportunities for providers too, as long as they’re open to respond to the challenge.
To do this, they must focus on developing meaningful customer experiences. Those that are successful will keep their existing customers and attract new ones. Pension organisations must also build the right technologies into their customer-facing platforms to attract and then quickly respond to consumers. They can then be presented with offers tailored to their specific requirements.
If providers can get these things right, then the arrival of the dashboard may present a valuable opportunity.
Here are four ways in which we believe providers can rise to the challenge:
- Build trust. Make it personal
- Understand and provide value around customer data
- Make the customer experience positively seamless and delightful
- In uncertain times, assessing customer behaviour is crucial
Various financial industries have experienced the same changes - so the pensions market has nothing to fear. Change brings much opportunity to improve and take customer success to new levels.
Richard Howells, Head of Wealth Life & Pensions, Experian
This was posted in Bdaily's Members' News section by Richard Howells .
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