Pension schemes and providers will be able to set up their own standards for individual data verification, which could lead to missing information on dashboards if pension funds opt for a risk adverse position.
The warning has been made by former pensions minister Steve Webb, now partner at LCP, after the publication on Tuesday (December 15) of the key data standards for the project by the Pensions Dashboards Programme.
Data standards serve as a common language describing the information that will be submitted and available to view on the dashboards. Every UK pension provider will be required to ensure that all the data they hold is consistent with the data standards so that customers know what they have access to.
The new standards will cover the initial implementation of the pensions dashboards, governing three types of data.
‘Find data’ is information received by the pension provider that will be used to match individuals against the pensions they hold. Customers will need to provide this data, including first and last names, date of birth, address and national insurance number, via an identity service to use the dashboards.
‘View data’ is the information displayed to the customer once they have provided their find data and been matched to their pension. It will include information such as the person’s pension arrangement and the name of the provider.
‘Income data’ displays to the user an estimate of their retirement income and the date payable for each pension. Should they have a defined contribution pension, income data will also include the current value of their pension pot.
Data match requirements
However, schemes will be able to set their own match criteria, determining the standards to accept in terms of ID verification before supplying data to a dashboard.
LCP explained that given that scheme data is often imperfect or incomplete, some schemes may decide that a match on certain variables – such as NI number or date of birth - is good enough, whilst others may insist on a higher level of verification.
Sir Steve said: “The new information about the data that will be required to be displayed on dashboards is welcome. But it is surprising to see that schemes will be free to make their own decisions on how close a data match is required before they will send data to a dashboard.
“Schemes will understandably be very nervous about accidentally revealing pension data to a third party in error. If they have a free hand they will have a strong incentive to be very ‘risk-averse’, only supplying data if they are absolutely certain of a match.”
He noted that this could lead to large numbers of ‘false negatives’, where individuals are members of a certain scheme but it will not show on the dashboards.
“If this happens at scale, this could undermine one of the purposes of the dashboard, namely to help re-unite people with lost pension pots,” Sir Steve warned.
All UK-based state, public and private sector pensions will be included in the dashboards at launch, which are expected to be rolled out from 2023.
The PDP will be running a series of webinars throughout 2021 to outline its data standards in more detail.
Chris Curry, PDP principal at the Money and Pensions Service, noted that the standards were created following “robust collaboration” with the pensions industry, regulators and government, he said, adding that it was important that dashboards begin “at a realistic starting point”, which the “find and view” data requirements represent.
“We know some challenges lie ahead when it comes to refining the data standards, but as the programme progresses we will incorporate further industry feedback,” Mr Curry added.
More detail needed
Despite welcoming the publication of the data standards as signifying “good progress”, Nigel Peaple, director of policy and research at the Pensions and Lifetime Savings Association, warned that “more work will be needed on detailing and specifying these standards over the next year”.
“Crucially, these standards will enable savers to understand their estimated retirement income more easily than ever before, though some serious challenges remain to ensure that [estimated retirement income] values are consistent across DB and DC entitlements,” he said.
For defined benefit schemes, the effort needed to comply with the Pensions Dashboards Programme requirement to provide an estimate of the annual income the individual might receive in retirement, in today’s money terms, will be significant.
Mr Peaple added that it was now vital that the PDP focused on developing “a robust consumer protection framework over the course of 2021”.
“Appropriate protections should be in place long before the first dashboard goes live to ensure that the data dashboards present and the functionality they offer do not result in consumer detriment, mis-selling or pension scams,” he added.
maria.espadinha@ft.com, benjamin.mercer@ft.com
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