Why the Pensions Dashboard is more than a Data Collection Exercise 24 June 2019

Where are we today? Consultation response issued April 2019 “…for too long, pensions have been obscure, hard to understand and inaccessible to many. Pensions dashboards will change this. Simple information, securely provided to your phone or computer will provide key information on a saver’s pension.” “In the first phase of dashboards’ development, no additional regulations are needed to ensure consumers using dashboards are appropriately protected.” What can the actuarial profession bring to the party Comparability of benefits in a consistent manner Understanding of risk State pension - straightaway It should show all DB and DC pensions. Pensions shown should include pensions in payment Ideally we think pensions should be shown accrued to some recent date and in current terms. But maybe initially linked to statements/readily available info – so just pension at leaving/scheme specific retirement ages And actually as we believe that it is important that information shown should be consistent with other sources to promote trust this may have benefits and be information which should be shown anyway. 24 June 2019

Phased functionality ‘Find and View’ Dashboard v1 Dashboard v2? Additional functionality – Value of my benefits Dashboard v? (Many dashboards?) Find pensions Collate information Introduce Dashboard Click throughs Current fund values/CETVs Options and guarantees Contingent benefits Fee structure Risk assessment Retirement planning Interactive tool Investment choices Decumulation options Clearly everything that would be nice to have can’t be included on day 1 – risk that you try to do so much that nothing happens So we think that the dashboard should essentially be phased in with the initial issue primarily being a pension tracing service bringing together all accrued benefits. As on slide. This itself may take sometime especially if legislation mandating provision of data is required and this itself allows for a degrees of phasing across large and small organisations. However an initial issue like this would allow the infrastructure to be set up and for the dashboard to be introduced to the consumer. After this the dashboard could have additional functionality added, … And from then, who knows, … Pass onto to Glyn now to talk about some of the complications of showing all benefits side by side. 24 June 2019

How do we deal with…DB and DC Defined Benefit Defined Contribution Default “decumulation” – scheme pension Normal Retirement Ages (varying by scheme and often multiple) crucial to interpreting accrued benefit promise Defined pension increases Defined survivors’ benefits Option factors Market insensitive Limited choice of revaluation methods No default decumulation option Arbitrary Normal Retirement Age Optional pension increases Optional survivors’ benefits Factors less important? Market sensitive Expected returns on assets differ widely Concentrated occupational market, but lots of individual personal arrangements too 24 June 2019

How do we deal with…DB and DC State @ SPA Add DB@SPA? Initially DC @ NRD? Different pension ages Initially DB@ NRA(s) Add DC@SPA? 24 June 2019

How do we deal with…DB and DC ABC Mastertrust – www.ABCmastertrust.co.uk Projected Pension - £2,500 pa payable from age 65 XYZ PLC Pension Scheme – www.XYZpensions.co.uk Projected Pension - £5,000 pa payable from age 60 Basic State Pension – www.gov.uk Projected Pension - £6,000 pa payable from age 67 24 June 2019

Who sets DC projection assumptions? Provider-set Dashboard-set Builds on SMPI approach, and can be consistent with it Captures variety and complexity of asset strategies, lifestyling and expenses. Can cope with scheme-specific features, e.g. guarantees and factors Requires providers to do projections (at least to retirement)? Expected return competition? Reduces provider work Same expected returns for similar assets Loses variety and complexity of asset strategies, lifestyling and expenses – and therefore less accurate? No scheme-specific features Inconsistency with SMPIs…unless SMPIs aligned with dashboard methodology 24 June 2019

Who sets DC projection assumptions? Future Contributions under SMPI Can be flat, inflation linked or earnings linked 25 yr old earning £25k pa with an estimated retirement age of 68 currently contributing 10% of salary No increases Inflation linked (assume 2.5%) Earnings linked (assume 3.5%) £160k fund at retirement £283k fund at retirement £357k fund at retirement 24 June 2019

How do we deal with…different risk profiles? Invest-ment Personal Health Longevity Risks Inflation Data Covenant 01 October 2019

How do we deal with…different risk profiles? Needs something that is understandable by the consumer, but who is going to develop and assess this 01 October 2019

How do we deal with…guarantees and options? GARs Scheme-specific / complex Scheme-specific lump sum protection Guarantees & options Protected pension ages CDC Factors 01 October 2019

What happens next? Industry Delivery Group Must ensure areas of the industry who can support the translation/comparability of benefits are well represented Highlight the importance of consistency across pensions communications Be clear about future functionality and ensure that building blocks are put in place to support it 24 June 2019

Questions Comments The views expressed in this presentation are those of invited contributors and not necessarily those of the IFoA. The IFoA do not endorse any of the views stated, nor any claims or representations made in this presentation and accept no responsibility or liability to any person for loss or damage suffered as a consequence of their placing reliance upon any view, claim or representation made in this presentation. The information and expressions of opinion contained in this publication are not intended to be a comprehensive study, nor to provide actuarial advice or advice of any nature and should not be treated as a substitute for specific advice concerning individual situations. On no account may any part of this presentation be reproduced without the written permission of the IFoA. 01 October 2019