Pensions Dashboard: the ambitious revolution
The Pensions Dashboard is a digital interface that will enable individuals to see an overall picture of their likely retirement income from occupational, private and State pensions. It is a hugely ambitious project and is already years behind schedule, with a current target of the end of 2023 for the initial non-commercial model to start to be populated, to be run by the Money and Pensions Service. Trustees will, over the coming years, have to provide a significant amount of data and create new systems to interact with the dashboard – but what can they do now to prepare?
Why is this being done?
The Government is trying to improve transparency in order to encourage saving for retirement. A secondary aim is to facilitate consolidation and value for money. The success of auto-enrolment has led to 8 million ‘small pots’ in DC Master Trusts, projected to rise to 27 million by 2035. In time, there may be multiple commercial dashboard providers, and it may be possible to carry out transactions such as paying contributions or transferring pots via a dashboard app although, in the House of Lords in particular, there is concern that this may give rise to an increased risk of pension scams and the latest consultation suggests that the dashboard will not offer ‘any functionality which enables transactions.’
How will it work?
A member will be able to ask the dashboard to find details of their pensions. The dashboard provider will have to verify the member’s identity by sending basic member information to the dashboard identity finder. The identity finder issues a “find request” to schemes. If the scheme finds a match with member information, a match is made between the dashboard and the scheme, and the scheme will make “view data” available through the dashboard about the member’s accrued and projected benefits in the scheme. The member can then access the information about all their benefits side by side on the dashboard. The first dashboards are expected to be available with staged onboarding from 2023 running through to 2026 with larger schemes going first.
What data will schemes have to provide?
The detail is to be set out in regulations and guidance. In principle the Government has attempted to limit the data required outside what is currently held by schemes. For example, DC estimates of retirement pots could be based on Statutory Money Purchase Illustration assumptions, or in line with FCA projections. There may be some scope for schemes to choose how to present their data.
In January, the Pensions Dashboards Programme updated its draft dashboard data standards document (https://www.pensionsdashboardsprogramme.org.uk/2022/01/31/data-standards/) setting out the type of information to be provided. This will include information on ‘expected retirement income’, and accrued pension figures if they are different (for open schemes), split into different tranches where it is payable at different dates, and where it relates to service with different employers, stating the start and end date of the employment. The Pensions Dashboard will also contain links to scheme websites for information on costs and charges, statements of investment principles and annual reports.
What are the risks?
There are considerable practical difficulties in operating Pensions Dashboards. The main concerns are getting the data right and protecting members from fraud. Using dashboards will require member consent, and data protection legislation will treat this processing as for a proper purpose. In effect this will operate as a new national system of identity verification. Scheme trustees will need to exercise vigilance and caution before sharing data on a dashboard to ensure that they are not revealing sensitive information to the wrong member. There will, however, need to be a balance struck in ensuring that there aren’t large numbers of “false negatives”, which will go against the spirit of the legislation which was introduced to reunite people with their lost pension pots.
Schemes should also note that complying with these provisions will involve a large data migration exercise, which will result in significant cost and resource implications. PLSA research showed that their members believed it would be a two-year project.
Consultation on draft regulations
Last month, the DWP launched a consultation on the draft Dashboards Regulations. These draft regulations make provision for requirements to be met by pension dashboard services and cover data, find and view, connection, staging compliance and enforcement of pensions dashboards. The regulations do not yet cover the detail of how this is to be provided, which will depend on the critical lessons and sharing from participants in an ongoing “alpha” phase of testing which is due to run for 6 months through until June this year. The consultation closes to responses on 13 March 2022 and the DWP said its aim is to lay the regulations before Parliament for debate later this year.
Trustees should begin to consider these data standards now and identify any data gaps that need filling in order to ensure that they will be ready to provide the right information at the right time and consider whether they need legal advice to ensure that the information provided is correct. Some of the information required may be presented differently to the way schemes currently hold information and trustees will need to work closely with their administrators to make sure they can create the right records in time to be able to comply with the new obligations . Schemes (and their trustees, sponsors and respective advisers) must also take the associated costs into consideration when carrying out any financial forecasts and will need to consider what systems they need to put in place to be able to respond to Dashboard requests.