The pensions dashboard: achievable goal or pipe dream?
Liz Duffy explores the enormous challenges likely to be encountered in the delivery of the pensions dashboard.
Benefits of the pensions dashboard
The concept of the pensions dashboard is desirable for the UK Government and individuals, particularly if it encourages people to review their pensions savings and take action to plan for their retirement. If it achieves the desired result people should be better prepared financially for their retirement and hopefully less reliant on state benefits. It is, however, a massive, massive challenge - not least the timescale - and the remainder of this paper highlights some of the issues facing the Government, the project and the pensions industry.
The biggest challenge is time: in the 2016 Budget Statement, George Osborne announced that the dashboard would be delivered by 2019. This is a very ambitious timescale for a task of this scale and complexity.
In less than three years, the Project Steering Group, established by the Association of British Insurers (ABI), not only needs to develop and test the dashboard, but needs to interact with:
- the UK Government to agree the governance arrangements and legislative requirements; and
- the pensions industry to agree the data format and data interfaces into the dashboard.
These will be an enormous asks within the current timescale.
There are a number of stakeholder groups when it comes to the pensions dashboard, but before looking at the impact on these groups there are some wider issues to consider.
Potential challenges arising from wider events
What impact will the decision to leave the EU have on pensions and will this have a negative knock on effect on the dashboard?
The role of pensions minister has been downgraded from Minister of State to Parliamentary Under Secretary in Theresa May’s new Government, although the pensions brief is purportedly unchanged. Is this a sign that pensions and retirement saving are not regarded as high a priority for the new Government? Will HM Treasury become the dominant force in pension policy?
At this stage it is too early to assess the effect of these developments on pensions in general and the dashboard in particular, but the signs are ominous.
With regard to the stakeholders directly impacted by the dashboard these fall broadly into three main groupings:
- The Project Steering Group overseeing the delivery of the dashboard
- Pensions providers and administrators
- Government and regulators
In addition to these stakeholders there are the end users, pension savers, to be considered.
Practical challenges of delivery
As noted above the Steering Group has a lot to do in a relatively short timescale, but some key questions need to be addressed.
Currently there is no legislation or regulation in place to ensure that the pensions providers and administrators co-operate in this project to provide the data required to populate the dashboard. For some it will be a significant undertaking to provide the data in the required format and there may be a reluctance to do so. The Project Steering Group is likely to need some sort of legal framework to work within and given the current situation the Government may be hard pressed to react quickly in this regard.
Funding is another important area. This initiative is to be industry funded. HM Treasury announced in the Budget 2016 that there would be no public funding for the dashboard. Although the Project Steering Group has conceded more work is required on how to fund this, the point is that the dashboard will not only be populated with details of private sector pensions but also public sector pensions and state pensions. Is the Government expecting the pensions industry and\or commercial firms to cover the initial and ongoing costs of building and populating the dashboard for all these pensions?
The pensions industry will be required to provide data to populate the dashboard and it will have to be in a standard format. For many providers this will be a huge undertaking particularly for closed books of business and older style pension products. Not only will this be a significant internal cost to the industry, but it will divert their resources from other more commercial projects for little perceived benefit from their perspective.
The Pensions Finder Alpha white paper, produced by a Working Group, prior to the establishment of the Project Steering Group, recognised that the delivery timescale is very tight and one of its recommendations is phased delivery. There are various ways in which delivery could be phased, for example by type of scheme or customers born after a certain date. No decision has yet been made, but while the Project Steering Group recognises that it will need to manage the expectations of consumers during the phased period there has so far been no comment from the Group on how the phasing may affect those providing the data to the dashboard. This could, depending on the approach selected, create more work for those in the pensions industry.
The pensions dashboard will obviously provide access to a vast amount of personal data and this raises not only the question of data protection, but also where this data will be held. The preference among consumers is for a single destination dashboard where they can view all their pensions in one place. The Project Steering Group is considering what type of organisation could be responsible for the pensions dashboard, but whether it is an existing or new organisation there are arguments for it being publicly accountable. This inevitably throws up a number of data protection issues such as what amount of data storage is acceptable, risks of security breaches etc. The Project Steering Group is aware of the issues and is keen to stress the importance of having a governance committee to oversee the operation of the dashboard, but acknowledges the need for more work in this area.
It is not clear at this stage how the Project Steering Group intends to engage and communicate with consumers to make them aware of the pensions dashboard and how it can assist them with their retirement planning.
The pensions dashboard is a huge project with many deliverables in a short timescale. There are many work streams with big decisions to take which need to be carefully managed to ensure the project is moving forward in accordance with the timeline. Collaboration across many stakeholders over a range of issues is required and has to be well co-ordinated. Most importantly, to avoid damaging consumer confidence, the Project Steering Group and ultimately, the UK Government, must get it right!