Living with Pensions Dashboards
Dashboards are on their way – from April 2023 for the largest schemes – and we need to start thinking about what that will mean. Short-term admin costs are surely likely to rise, though more automation may bring benefits in the long term.
Barring regime change at the DWP, the dashboards project seems unstoppable. The Minister wants a “see my pensions” button on your banking app. We all get why that would be a good thing for consumers. The fact that pensions are complicated isn’t going to be allowed to stand in the way. It’s a hugely ambitious project, and radical simplification is essential for the project to succeed. If we have to make everything look like an apple, for the purpose of comparison, it’s not our fault if it turns out to be a pear.
Trustees will have to do 3 things: connect, match and provide.
Connecting to the ‘ecosystem’ will start in a year’s time for the biggest DB schemes and master trusts. That’s an ambitious timescale. Schemes will be dependent on their administrators to build the systems needed to connect to an infrastructure that doesn’t yet exist, in accordance with regulations not yet made.
Matching will be a data challenge. Every request made in the UK every day will go to every scheme. Schemes have to say ‘yes’, ‘no’ or ‘maybe’ pretty fast.
What value data must be provided? Consumers want one figure. Ideally a single aggregate monthly income from DB, DC, personal pensions and State pension. Simples!
Now that the DWP has published the draft regulations we can see they are painted with a very broad brush. There are significant glitches in the draft regs but let’s assume they will be fixed.
DB schemes must give a single pension figure for deferreds, with some kind of revaluation (still under discussion) to a recent date and a statement of “whether” the pension increases or carries survivor benefits. No tranching for payable ages or different pension increase rates. For actives there’s another, projected, figure assuming continued accrual to normal pension age. The key issue for schemes is what supporting information they will feel they have to provide to add colour to these simplistic statements and how far they will encourage users to contact them for more information (maybe via click-throughs).
Separate FCA and FRC consultations run alongside the DWP one for contract-based schemes and projecting DC pots and converting them into income.
In short, the figures provided on the dashboards figures aren’t designed to be accurate. They aren’t real estimates. They are indicative figures, called ‘soft numbers’ in other countries who have done this before us.
To recognise this there will need to be standard form mandatory disclaimer wording. Recoverable loss will be hard for members to prove.
TPR will be able to fine for breaches. Data protection allows compliance with legal requirements and the regimes have to mesh together if the dashboards project is to get off the ground. If there is liability, it will lie with the party responsible for the problem; trustees, administrator or a provider within the ecosystem.
What should schemes be doing now?
- Checking their proposed staging date, which depends on the number of active and deferred members
- Talking to their administrators about what work is needed to be ready to comply
- Checking their data and scheme rules to make sure they can provide a correct revalued deferred pension figure. Revaluation is one of the areas where scheme rules have most often gone wrong. It’s important to remember also that old rules often still apply to earlier leavers.
Dashboards could be transformative but pensions admin wasn’t designed for this. It can all be done, but at a cost, and subject to capacity in the administration market. Maybe it’s an investment that is long overdue.
Read Anna’s article in Professional Pensions.
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