The pensions dashboard: What next?
In 2016, the UK Government made a commitment to ensure that the pensions industry designs, funds and launches a pensions dashboard by 2019.
The project is led by the Association of British Insurers (ABI) on behalf of HM Treasury.
The purpose of the dashboard is to encourage retirement saving by delivering information on an individual’s state pension entitlement and their workplace and private pensions savings on-line, in one place.
After a period of cross industry collaboration, design and development, the dashboard prototype was launched as planned in April 2017 for demonstration to Government, the pensions industry and other stakeholders.
Government policy, supported by the ABI, is to create a marketplace for dashboards to encourage innovation rather than to provide a single centralised portal. The prospect of multiple dashboards has raised concerns over the potential that this could confuse consumers.
The delivery of a prototype bodes well for the dashboard project but several important hurdles remain. Whether the political will exists to see the project through to fruition within the current timetable remains to be seen.
The appointment of Guy Opperman MP, as Pensions Minister, with an extended brief covering financial inclusion, signals an acknowledgement from Government that financial capability is a significant barrier to pension saving. This positive development must be tempered with concerns that pensions policy generally has slipped down the Government’s agenda as it tackles the Brexit negotiations.
It is essential that the data being accessed by the dashboard is complete and accurate.
Data cleansing exercises will be required to some degree across the industry. However, retrieving data from legacy pensions schemes and contracts, hosted on older IT platforms is expected to present the biggest challenge. A survey conducted by information and communications technology experts, ITM, found the degree of missing or inaccurate data held in respect of pensions set up prior to 2000 was a significant concern, particularly for defined benefit (DB) schemes.
Data cleansing could be perceived as an expensive exercise with no benefit by some pension providers who may then choose not to participate in the dashboard, unless there is compulsion. The UK Government, The Pensions Regulator, Financial Conduct Authority and others have commenced discussions on the thorny issue of compulsion.
Ensuring data is secure is another major challenge the dashboard will need to meet and the legal and regulatory framework surrounding the dashboard will need to consider where accountability for any data breaches sit. This is in the context of the EU’s General Data Protection Regulation coming into force in May 2018.
What about funding? No taxpayers’ money is being made available to finance the dashboard. So far, the 17 firms involved in the prototype project have each contributed £50,000, but there is no agreement on future funding.
Consumer expectations will need to be managed as the data available to the first dashboard will be limited.
Initially the dashboard will display only state pension entitlement and the value and income purchasing power of defined contribution (DC) pension pots, pensions in drawdown will be excluded.
A phased rollout to retrieve DB pension information, including public service pensions, will follow, beginning with information from schemes administered on more sophisticated IT platforms.
Information on fees and charges attached to products are to be omitted and may never be included. Reaching industry-wide agreement on a common means of describing complex fees and charges in a way which allows consumers to compare DC contact-based products is proving challenging.
If the aim of the dashboard is to provide the user with details of all their pensions and to engage them in saving for retirement, the omission of key information could undermine consumer confidence and the project’s objective.
The ABI plans for the next phase of the dashboard project are:
- to undertake an industry-wide cost benefit analysis
- to research consumer needs
- to establish requirements and costs for a fully secure service
- to establish technical data standards for pension schemes and insurers
The ABI recognises that a legislative, regulatory and governance framework needs to be established prior to the launch of the dashboard: this will require the commitment and resources of Government.
Critically, a funding model for keeping dashboard technology up to date needs to be agreed: without Government money, the cost will fall on providers. This could prove contentious given the downward pressure Government has placed on charges, particularly for contact-based DC savings products.
The question of funding the dashboard cannot be viewed in isolation, a new regulatory regime for master trust schemes is to be established following the Pension Schemes Act 2017 with further work needed by Government in consultation with master trust providers on who pays for this.
In August 2016 ICAS published two initial articles on the UK Government’s vision for a pensions dashboard: