The regulator’s new pension dashboard rules are set to give a huge advantage to defined contribution consolidators who set up their own dashboards, according to LCP partner Steve Webb.
Last week, the Financial Conduct Authority published a consultation outlining rules designed to govern the activities of companies who provide pensions dashboards.
It said it will prohibit third parties from charging customers for services linked to pension dashboards as part of its regulatory framework for the initiative.
According to its consultation, published on the same day that the Pensions Dashboards Programme issued its own consultation into design standards, the FCA recognised that some dashboard providers will look to third-party agreements for areas including licensing or third-party hosting.
Any agreement with a third party, however, must allow dashboard providers to monitor that third party’s activities, while third parties will be prevented from making changes to the dashboard service and from charging customers for dashboard-related services.
Webb said one key feature of pensions dashboards will be the ability of users to ‘export’ their data.
Although dashboard providers may choose not to offer this facility, it seems highly likely that many will offer the user the ability to download their own data and also to export the data to the provider’s site.
We are very likely to see a ‘dash for DC cash’ when dashboards go live. Steve Webb, LCPThe FCA said that although this raises potential risks, there would be problems if users could not export their own data.
This includes the risk that people would use do-it-yourself methods such as taking screen captures of their data and then sharing it in a much less secure and less controlled way.
The FCA rules propose that there would only be two places where the user could export their data.
- Export to themselves
- Export to the dashboard provider (or firms in the same group with permission to give investment advice).
However, Webb said:“When pensions dashboards become available to the public it seems highly likely that this will drive member consolidation of their DC pensions with a single provider.
“If users of a dashboard can press a button and export their data into attractive tools, offered by the dashboard provider, this will ‘hook them in’ to engaging with that provider and greatly increase the chance that any DC consolidation is to that provider.”
Webb explained that given the large number of fragmented pension pots, not least since the advent of automatic enrolment, it is widely expected that one consequence of the launch of pensions dashboards is that individuals will be prompted to consolidate their DC pensions with a single provider.
However if the only direct way in which consumer data can be exported to a provider is if they operate a pensions dashboard, this will put such providers at a head start when it comes to ‘harvesting’ DC pots.
Individual users will have the option of logging on to a dashboard, exporting their data to themselves and then uploading it to a third party site, such as another DC consolidator.
Although, this will be a much more involved process than doing it directly from the dashboard, especially one that links directly to tools which have been ‘pre-populated’ with member data.
Webb added: “This could put dashboard providers in prime position compared with other consolidators who would have to get users to download data – possibly from a rival’s dashboard - and then re-upload it to a different site.
“We are very likely to see a ‘dash for DC cash’ when dashboards go live, and the restrictions on data export mean providers who set up their own dashboard are likely to be the winners of that race."
The FCA has indicated that the exported data should not include full customer reference numbers and should not be sufficient therefore to allow for immediate transactions.
Nonetheless, Webb said a DC consolidator who has been supplied with a full list of a saver’s pensions will be extremely well placed to complete the process of pot consolidation.
The consultation also said platform and self-invested personal pension (Sipp) providers will be required to warn investors of the impact inflation can have on their pensions under new guidelines.
The FCA said all non-workplace pension providers will need to issue a “cash warning” to consumers with a certain level of cash in their pension, outlining how high inflation will erode their savings.
An FCA spokesperson said: “We welcome comments and feedback from the industry on the proposed regulatory framework for pensions dashboard service firms. Once the consultation is closed, we will review and consider all of the input.”
sonia.rach@ft.com
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