Master Trusts lose to Dashboard
The Master Trust that fails to consolidate member's pensions will be in long term decline - see by how much at the end of this article.
People have multiple pension pots and until “Pot for Life” exists as an option, the number of pots per member will only increase. In addition, more people will get access to Private sector and Government Dashboards as technology inevitably improves.
Why will people use Dashboards?
There are essentially two reasons:
Convenience. To show everything in one place. As per banking apps etc, lots of people like to see all their pension savings in one place
Planning. Tools simply don’t work if they don’t include everything someone has. People are forced to add all pension pots (as well as other non-pension pot assets and income) to any planning tools which work on a holistic basis.
In an ideal world the best Dashboards will show all pension pots, with live updating values. Those live values would link directly to the long term planning tools. The plan updates in real time with the pots and savers can see quickly “is my long term plan still feasible” “do I need to act”. Once available, nudging to action based on these outcomes is even possible.
We believe we may be the only planning tool which currently encompasses both key features.
What does this mean for consolidation?
It is not a difficult message for providers to say, “you’ve put all your pots on our Dashboard, bring them in with us and make life easier”.
If the provider has competitive pricing, the message can be reinforced further by showing the savings possible for the member over the course of a lifetime. Members struggle to understand 0.4% vs 0.6% p.a. vs tiered vs flat fee, or a combination of these.
However, by building a plan with all pots they can compare on a £ for £ basis, which everyone easily understands.
Guiide has been used to help people consolidate pensions for the last two years. Even without promotion we see that around 45% of assets placed on a Dashboard end up being consolidated with a provider offering Guiide.
Natural points of consolidation
Changing jobs and at retirement are among life events which lead to consolidation. These consolidations will increase in future. With the wider adoption of Dashboards, consolidation will also occur at other times, due to marketing from Providers.
Any Provider where the member has pots (and even those without any) can provide the Dashboard and planning tools needed to encourage consolidation into their products and away from others.
Pot for life
At present a provider’s active member’s assets are essentially protected from this ‘attack’ whilst they remain employed, as no provider will accept pots with employer contributions being paid. However as 20% of members switch jobs each year (or retire) this protection only lasts for so long. In future, if Pot for Life becomes an option this protection will be fully removed and will speed up consolidation further.
Winners and losers
There will inevitably be provider winners and losers. Those that offer the best planning technology and user experience to accompany their Dashboards and make consolidation as simple as possible will be winners.
However, those with inadequate planning tools (especially those which are not holistic), poor user journey experiences, Dashboards not linked to live plans, sub optimal post retirement offerings and cumbersome transfer in processes will be losers.
How much difference does it make?
We have modelled a provider with £2bn of current assets showing long term decline if they fail at dashboards and consolidation. If they are winners then they will see assets increase more than fourfold.
Contact Philip Hodges FRSA or Kevin Hollister to see the Master Trust model.