The pensions dashboard: A marathon not a sprint

This followed on from a roundtable discussion, held on November 27, and a letter from Work and Pensions select committee chair Frank Field to pensions minister Guy Opperman urging him to commit to legislation compelling firms to provide customer data for the dashboard. 

Clearly, the feasibility study had been in the works for some time at the DWP, because although the idea of a pensions dashboard has been around for a long time now, there had been little progress in the delivery of an industry-wide solution.

The pensions dashboard is intended as a service that provides a system where consumers can view all their pensions in one place. There has been some concern that providers won’t be willing to provide this information to a central dashboard. But to combat this, and to ensure all pension information is available, the government has stated it is indeed prepared to legislate to compel schemes to provide their data, should that be required. It has also committed to take steps to provide state pension information via dashboards.

Delivery of the project

The government is planning to help convene a delivery group of experts from both the industry and government, although it has stressed the majority of input should be from the pensions industry and other external parties. The group is likely to be led and steered by the single financial guidance body, with the government working with regulators to ensure consumers are protected. The guidance body launches its services to the public in January 2019, so this project will be one of its first tasks.

The government has set out how it sees the steering group being established: a chair will be appointed by the guidance body in spring 2019 to oversee the whole process and act as final arbitrator should there be a lack of consensus. Below this will be a steering group, implementation executive and various working groups covering the different areas of the project.

There clearly needs to be a central group and a lead for this project, given there are more than 40,000 private pension schemes – managed by more than 4,500 providers – in existence. There are also all those occupational schemes managed by their own internal administration. 

Auto-enrolment will continue to add to this complexity, as more and more of the workforce have small pension pots from various employers. However, it will be difficult – even with appropriate consultations – for all those impacted by the dashboard requirements to have their say. 

In order to ensure full coverage is achieved in a timely and cost-effective manner, it is key that even the smallest of providers are engaged at the earliest stages of these proposals. The plan is to have initial data supplied in 2019, with the majority of schemes included in two to three years.

The time scales may seem generous, but as we have seen with previous technical innovations, getting all parties using the same protocols to communicate can be a very lengthy process for all involved. Some administrators, especially those running in-house occupational pension schemes, will have a variety of systems, many of which could be bespoke.

Purpose of the dashboard

In order to be successful, the dashboard needs to provide a complete picture of a person’s pensions wealth, irrelevant of the size of funds and the number of schemes a consumer has. If some pension schemes are excluded, it won’t have the desired impact.

The report states that as a minimum, pensions dashboards can help to:

• Increase individual awareness and understanding of their pension information and estimated retirement income;
• Build a greater sense of individual control and ownership of pensions;
• Increase engagement, with more people taking advantage of the available advice and impartial guidance;
• Support the advice and guidance process by providing people with access to their pensions information at a time of their choosing;
• Reconnect individuals with lost pension pots, benefitting the individual and industry; 
• Enable more informed user choices in the decumulation phase – the point when a decision is made by a saver on how to access their savings – by making it easier to access the information on which to base these decisions.

The proposals don’t restrict the number of dashboards, but a central, non-commercial dashboard is envisaged as being hosted by the SFGB to offer an impartial service to those who may not be targeted by the commercial offerings. This is seen as the starting point, with other commercial offerings to follow. 

Although the option to have additional dashboards could be seen as a positive, it could alternatively just cause more confusion. However, the government’s international research found only positive outcomes in the few existing examples of multiple-dashboard systems.

Pension finder service

In addition to the dashboard, the government is proposing a single pension finder service and will compel schemes to provide their data to this. As this is part of the main project, the industry delivery group will also be responsible for its design and implementation. 

The service will be designed so that the information will directly be linked to a member’s dashboard if a provider responds positively to the search, rather than being sent to the pension finder service.

A pension tracing service is already available to consumers, and this should continue until the new option is available. Having full knowledge of all the pension schemes to which a consumer belongs is key to ensuring appropriate planning can be undertaken for the future. 

Defined benefit pensions are often referred to as frozen, but this isn’t the case, and getting regular updates would make it easier for consumers to understand what they have, and to protect them from scammers.

Costs to the industry

As announced in the recent Budget, the government committed to funding for 2019-20 to help fulfil its facilitation role, though it stopped short of actually funding the creation of the dashboard itself or the ongoing costs. It has been made clear that the cost of the governance structure should be met by the pensions industry, and that it should also fund:

• The development and delivery costs of the dashboard infrastructure, such as the pension finder service and identity verification;
• The development of a non-commercial, consumer-focused dashboard hosted by the SFGB; 
• Any new regulatory functions related to dashboards.

The pensions dashboard will not be welcomed by all providers and administrators because it is likely to increase the levies chargeable on the providers with little or no benefit to them directly. Without ongoing government funding, this appears to be the only way to fund the project in the long term, although it has said that different parts may be funded in different ways. The issue with this is that for those providers unable or unwilling to swallow up the charge, it is likely to be passed on to the consumer in one way or another.

The dashboard, if produced well, should bring increased clarity to consumers and hopefully more trust in the pensions industry. Many consumers lose track of historic pensions and don’t understand what they might now be worth. However, this will be a lot of work for the pensions industry, especially for those who are less technologically advanced or have more complex pensions such as self-invested personal pensions and small self-administered schemes. 

We are going to see very misleading values for assets that are not valued on a regular basis, such as commercial property, loan-backs or unlisted company shares. This is going to be a small part of the market, but that doesn’t make it any less important. In addition, those with closed books of business may not feel quite as compelled to get involved, and so legislation may be required in these cases. 

At the very start of the paper Guy Opperman says: “Over time, industry-led pension dashboards will transform retirement savings and pensions forever.” 

I am not as positive about this, but am willing to have my mind changed. The issue is consumers’ lack of engagement with pensions generally. A dashboard won’t really be able to address this without some more dynamic tools within it.

Claire Trott is head of pensions strategy at St James’s Place Group