You’re probably familiar with time capsules. You select a number of items that are of their time, and then seal them in a box and bury them to be discovered by future generations. Imagine the amusement of the internet generation when a box buried in 2000 is opened revealing:
- Yellow Pages - think paper-based member records
- Nokia mobile that just makes phone calls – think administration platforms that were never designed to enable member self-serve.
- Sony Walkman CD player – think analogue experience to the modern MP3 digital one.
All cutting edge at the time – now, largely, antiques. That got me thinking. What if we buried a DB pensions time capsule now and opened it in 10 years? Would anyone spot the difference?
Today we bury:
- Incomplete member data
- Paper benefit statements
- Incomprehensible member booklet detailing the scheme rules
- Most member communications
- Legacy administration platforms struggling with modern demands
The Pensions Dashboards initiative could be the catalyst to major change by driving schemes to a more digital experience.
Firstly, all records will need to be “digitised” to allow for find requests to be matched with member records. Out go paper records. Schemes will need to return an estimated retirement income where there is a match to a find request. That needs good data and a system capable of doing the calculation.
DC schemes already do a similar calculation each year. For DB there is no requirement to do this, and it could be a big stretch for some schemes. There’s also the overhead of a scheme attaching to the Dashboards infrastructure. Without getting into the technicalities, it’s not trivial!
Small schemes worst placed
Looking across the industry, the third party administrators and larger schemes are theoretically better placed to invest and meet the requirements. Schemes running on contemporary systems capable of fully delivering to the Dashboards requirements are few and far between, even at the big scheme end.
What of the mid-sized to small schemes? They are really up against it, often running on very old technology and on a tight budget.
If we’re to avoid the situation where we open a pensions time capsule years from now and see little change, the planning needs to start now for the smaller scheme trustees and their sponsors. They will need to be informed by professionals in the industry who understand the issues and can provide creative solutions to meet smaller budgets.
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