Further resources needed for pensions dashboard, says Trott

Speaking at an evidence session this week (July 12), Trott discussed the reasoning for the Department for Work and Pensions’ plans to introduce pensions dashboards and the need for the implementation delay.

She said: “It was the issue that we had around the connection process, which was needing more work in terms of the industry and there was insufficient testing in terms of the actual architecture itself.

“We needed more time to ensure that it was robust.”

Simon McKinnon, former chief digital and information officer at DWP, was also at the session and explained that while the fundamental work was going well, it had a fixed deadline of having to start connections. 

“It was clear it wasn't gonna be able to meet those timescales,” he said.

“We've done a detailed assessment of all aspects of the current programme and they are sound, the architecture will work, there has just not been sufficient time for them to complete the build, and to do the detailed technical testing, security testing, but most importantly, user testing that it requires.”

McKinnon said as part of the reset for the dashboard, DWP will need to fill the team. 

“It's got gaps in so at the moment, we're currently doing a detailed resource model by the end of the summer and that'll determine what additional resources it needs,” he said. 

“We're talking about less than a dozen people, some of which we hope to get from DWP to come and support the technical aspects of the programme.”

Trott argued that the pensions dashboard has a very important role as there are a large number of deferred small pots.

“Pensions dashboard will play a vital role in reconnecting people with lost pots,” she said. 

“In addition, giving people more of an idea of what they are likely to have in retirement because it's very difficult. 

“People have an average 11 small pots, they don't really know what that means for them in terms of what their retirement income is likely to be.

“The pensions dashboard will play a really important role in bringing that all together and also allowing people to see this alongside their state pension to get a full picture of what it's going to look like for their retirement.”

Meanwhile, the pensions minister was also quizzed on the DWP figures last week which revealed that individuals may have been underpaid about £1bn in state pension payments due to missing information in their national insurance records.

She said: “Obviously any errors are unacceptable and I recognise the huge impact this has on people's lives, which is why it's absolutely incumbent on us to get it right. 

“It's also a matter of huge upset to me that this has primarily affected women, which is not okay and so we're doing what we can we're working on this particular new round with HM Revenue & Customs. 

“We'll have a portal up and running very soon for people to check whether they might have been affected by this, and we'll be starting the process of writing later this year.”

Small pots vs consolidation 

In an update earlier this week (July 11), DWP said it will work to encourage consolidation to solve the problem of small pots rather than pursue the "pot follows member" approach.

But Trott said the longer-term solution to this issue would be to move to an Australian-style "pot for life" system.

In the evidence session, Trott said: “The response we put out said that for the stock of small pots, we are going with a default consolidator on the carousel model, which will mean that for pots of £1,000 will be put into a default consolidator and we are going through a consultation and exactly how that will work. 

“It’s going to be a carousel so it's going to be more than one so we decided to go for not one individual scheme, but a number. We’re consulting on how exactly that's going to work at the moment, we're asking for views from industry and from pension savers.”

She explained that this will fix the issue of the existing stock of small pots but what it won't do is stop the creation of new small pots.

“That's where I think we need to do some more work on what the right model is,” she said. 

“We're gonna be doing that over the summer with the hope of looking at what more we can do when we introduce the automatic enrollment consultation. I want to see whether we can look at models for what we can do with the flow as part of that.”

Auto-enrolment and VFM

One of the things DWP is looking at is whether it should do stapling or a lifetime provider model. 

Trott said: “We need to look at how CDCs can play a role in this and it's very important that the new and emerging models that we have within the pensions market are taken into account.

“I also recognise that there is a role that the employer plays and we need to balance these two things out so I think this is somewhere where we need to have a lot more conversations. We need to consult properly with industry and with savers and then come up with a model that which we consult on in the autumn.”

However, members on the committee raised concerns that stapling people to a lifetime pension provider could reduce the employer role in choosing an auto enrolment scheme provider.

But Trott said the DWP has come forward with “a solid proposal for the flow” in terms of the default consolidator, and a carousel model.

“We haven't said what we want to do about the flow,” she said. “At the moment, we're going to take more time to talk to people about that for exactly the reason that you outline.

“There is no perfect solution to this. If there was a perfect solution, we would have done it already.”

Elsewhere, the DWP also said it was moving forward with a number of the proposals within its value for money (VFM) framework.

In a joint publication by the DWP, the Pensions Regulator (TPR) and the FCA, they said the framework intends to retain proposed reporting periods of one, three and five years, with 10 and 15 if available, to allow investment returns to be evaluated over appropriate periods of time. 

This comes following the VFM consultation paper in January which proposed that pensions schemes will be required to disclose investment performance, net of all costs, as part of the new framework.

Trott said: “The value of money scheme is a response to the consultation and we're not proposing changes to the charge cap but what we're saying is when we're looking at the assessment of defined contribution schemes, we need to look not just at costs, but also about returns and service quality. 

“We propose some metrics within that in terms of how they'll be judged, and the information that those schemes need to provide.

“We've also said that the regulator will have the powers to take action on the back of this so that where schemes are underperforming, they can be asked to improve, consolidate or exit the market and that is really important because it gives the value for money scheme teeth.” 

She argued that this will mean there will be consistent information provided around the metrics that its talked about, but also the ability for the regulator to intervene when that's not being met.

sonia.rach@ft.com

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