Thanks to the pension reforms of April 2015, there is much more freedom and choice for prospective retirees today. Understanding the plethora of new options, however, and ensuring you make the right choice for your individual needs, can be enormously daunting.
Fortunately, the government appears to have identified the growing issue, and by next March a prototype ‘pension dashboard’ will be unveiled, aimed at allowing people to view their retirement savings information in one single digital place.
The pension dashboard, which is scheduled to launch fully by 2019, is expected to include a number of features to make retirement planning more straightforward and engaging for people approaching retirement.
A state pension forecast is said to be one such feature, together with updates on private savings from at least 11 pension firms, including Aviva, Standard Life and Zurich (who have already signed up to work on the project).
Perhaps most helpfully for thousands of people in the UK, the pensions dashboard will also be able to help savers locate their lost pension pots.
But what exactly would make the ultimate pensions dashboard? Here we consider the different features that would make life easier for prospective retirees, and get more people actively involved in their retirement planning from earlier on.
Monitor performance of pension savings
The pensions dashboard should be a platform that, at the very minimum, allows savers to witness the performance of all their pension pots gathered together in a single digital place.
It will help them to better plan for their retirement more effectively, making better and more well-informed long-term saving decisions.
It would need to be simple in design, and would allow people to personalise their saving goals and journeys as they plan for their retirement.
They should also be prompted to consider questions central to retirement planning, such as “am I saving enough to achieve the retirement income I need?” and “could I be saving more to enjoy a better quality of life in retirement?”
A dashboard which incorporates live economic data would allow people to instantly see how market fluctuations are affecting the performance of their pension funds. As they approach retirement, information such as this could help them make important decisions about when to start moving their funds to lower risk investments, for example.
With up-to-date pension funds viewable in a matter of seconds, savers will be able to see if they are on track to achieve the fund amount required at retirement, or if they need to be saving more, or perhaps looking into other retirement planning options, in order to meet their financial goals.
Help with tracking pensions
In addition to accessing up-to-date pension fund information in one place, the pension dashboard should offer a service that allows savers to locate pension pots for which they have lost track of.
Figures released by the government recently revealed an estimated £400million* is lying in unclaimed pension pots that have been lost or forgotten by people in the UK.
Almost a quarter of adults have at least one pension pot that they have lost track of, according to Age UK, perhaps due to the average person over 65 working for around 6 employers during their career.
Retirement planning budgeting tool
A budgeting tool could be included to encourage people to put more into their pension fund, or to find the money to top up gaps in their National Insurance record to perhaps achieve a bigger state pension income.
Taking the time to go through all out incomings and outgoings can seem like an enormous task to undertake, and just knowing where to begin can be the hardest hurdle to overcome.
By using a straightforward budgeting app on the pension dashboard, however, savers could more easily identify where cutbacks could be made in order to save more efficiently for retirement.
Of course, being able to access up-to-date statements and predictions for each fund value in one place will be a welcomed start, but what will people approaching retirement ultimately do with all the information available to them?
The pensions dashboard will be better equipped to inform prospective retirees if they can also use it to access regulated and independent advisory content. Information about all the retirement income and planning options available is central to this.
For those with a Defined Contribution pension fund who will be seeking a regular income from their pension savings, unbiased information about pension annuity products and drawdown options will be crucial.
Explaining their right to shop around for the best deal possible on their retirement income (their Open Market Option) when they are approaching retirement should also be made very clear.
For those not on track to achieving the retirement income required for them to enjoy a comfortable retirement, information about other retirement planning options such as lifetime mortgages also needs to be available.
Potential gamification of retirement planning?
In order to encourage people to more fully explore their options, a degree of gamification could be introduced to the pensions dashboard, too.
Gamification could increase engagement by rewarding savers with levels or points when they accomplish desired tasks. One such example could be when savers increase the amount of money they pay into their pension fund.
Online calculators within the pensions dashboard could use gaming techniques to engage users. People could be given a score to show how close they are to achieving their financial goals for retirement, with every additional payment to their fund taking them closer to their target.
A list of tasks could also be provided for savers to achieve in the build up to retirement, with their ‘score’ boosted each time a task is completed. Checking their credit score, for example, or using the budget app to see how much money they will need in retirement.
Each time a task is completed, points could be earned and savers would move up a level. There could even be a leader board to champion those working hardest to achieve their top score!