It’s hard to imagine anymore...
Just five years ago, if you were planning to go to a foreign city and were looking for somewhere to stay, you really just had one choice: Pay a hotel or bed-and-breakfast for a room for the night.
Paying a stranger to sleep in their spare room was not an option…. As a matter of course, anyway!
Airbnb is a classic example of a product that innovated and disrupted an entire industry.
It’s happening all around us – Uber is disrupting the taxi industry, Amazon is disrupting retail, and so on.
There’s some disruption coming to the pension industry in 2019, too…
Last week, I started telling you about all the work we’re doing to gain authorisation from the regulator for our Master Trust.
It’s been a full-time effort, as the process is so demanding.
When the regulator gives authorisation to the first batch of qualifying Master Trusts next year, it’s likely that the number of providers will have fallen significantly – possibly from around 90 to nearer 30, or even lower.
The benefits of being in a Master Trust will be the same for you as they are now.
You hand over the workload, stress and problems of running your own DC pensions scheme to a third party, likely saving money at the same time.
But the quality of those left standing will be higher, thanks to the rigorous process we’re going through.
And I believe that some of the providers will be more of a disruptive force in this field, shaking things up with bold, fresh ideas.
You see, previously, the Master Trust arena was dominated by industry giants such as Standard Life, Legal and General and Scottish Widows.
There was innovation in the market, amongst smaller providers.
But it was hard to take advantage of because there was no real way to tell whether their Master Trusts were a safe bet…. Or a horrible risk.
The regulator’s authorisation changes all that.
Now, you will be able to go where the innovation is with total confidence, because the Master Trusts have been vetted.
And this, in turn, will encourage more Master Trust providers to innovate…
Because disruption will be better rewarded.
Take our Master Trust, for example.
It does all the standard things that you would expect. We’ll handle your scheme’s governance and take the administration of your scheme completely off your hands, for example.
But we’ve also been determined to take the opportunity to engage with people about pensions in a way they haven’t seen before, using technology.
We know that people make better decisions about their pension pots if they consider all their financial circumstances together.
So, we’ve built a platform called Next Generation Savings that allows them to see all their other financial products – like their mortgage, their bank account and their investments – in one dashboard.
They can also play around with the variables…
For example, how is your pension pot affected in 30 years’ time, if you invest £5 or £15 more a month right now?
Or what would it mean for your mortgage if you increased your payments…. or alternately, reduced them?
This helps them visualise the consequences of their financial decisions and hopefully make better ones.
We’re also integrating other ways to help people manage their finances sensibly.
They’ll receive ongoing communication about financial issues at relevant times in their life.
And when they come to draw their benefits, we’ll offer more personal advice and guidance then, too…
So, we are planning to offer a service that helps them make the most of their finances pre-retirement, at retirement and in retirement.
This is good for them – and it’s good for employers, too, when staff feel more financially in control and secure.
This holistic approach shows both a completely new way to help people save for retirement….
… As well as the potential for using pensions to help people become more financially knowledgeable and confident in other areas, too.
It’s innovative. It has the potential to disrupt the entire industry.
And it will become available just as soon as we have our Master Trust authorisation, which we will be applying for in just a few short weeks.
So, watch this space (or let me know now if you want to be alerted as soon as it goes “live”).
Hopefully, within a couple of years, people will not be able to imagine planning for their pension without going to their financial dashboard first, or getting proper advice.
And if that sounds fantastical, or too fast, just remember Airbnb, Uber and Amazon….. 😊