Posted in: Wealth Management Administration
With the DWP expressing itself “delighted” by the quality of the 125 responses its pension dashboard consultation provoked, David Simpson assesses what now must happen to turn the concept into reality.
The DWP’s recent consultation on pensions dashboards, Working together for the consumer, certainly sparked the interest of the financial services sector, with the department confessing itself “delighted” by the quality of the 125 responses it received. So, where are we now and what needs to happen this year to bring dashboards from concept to reality?
The Department for Work & Pensions (DWP) makes it clear that dashboards will initially be a ‘find and view’ service, with more functionality added at a later stage. With £400m sitting in ‘lost’ pensions, that seems a sensible first step.
To ensure maximum coverage, the government will compel all schemes to participate in dashboards. The consultation’s suggestion of exempting small (in membership number) schemes such as executive pension plans (EPPs) and relevant small schemes (formerly small self-administered schemes or SSASs) has been amended. The case for any exemptions will be considered, however, with input from the delivery group.
There will be a phased approach to participation – with a three to four-year period likely before all schemes must be on board. Large defined contribution schemes are likely to be among the first to be compelled to participate.
There is a suggestion master trusts could be a sensible first group to include, but we should bear in mind more than 30 current providers have elected not to go through the authorisation process by The Pensions Regulator and will exit the market. These exiting firms must transfer their members to an alternative master trust scheme, which will likely increase the workload of some authorised providers and impact their ability to take on dashboard obligations.
Enforced participation can only be a good thing, but the DWP needs to secure parliamentary time to change the primary legislation. The target is this year but, given the current Brexit situation, it would be no surprise to see this slip into 2020. And while DWP says it will work towards inclusion of state pension details at the earliest opportunity, there is no guarantee this will form part of the initial dashboard delivery.
The consultation paper suggested a non-commercial dashboard overseen by the Single Financial Guidance Body – now known as the Money and Pensions Service or ‘MAPS’ – should be first to launch. Interestingly, this stance seems to have softened with the DWP now suggesting the delivery group build the digital architecture in a way that enables multiple dashboards provided by FCA-authorised firms to sit alongside a non-commercial model.
So who is responsible and what are their priorities? The delivery group will include a wide cross-section of industry and consumer representatives. Its steering group will set direction and include a principal, implementation director, representatives from the pension industry, fintech firms, regulators, consumer groups, the MAPS CEO as accounting officer and other government departments.
The delivery group is expected to be fully functional by summer 2019 with the following priorities:
In delivering against these objectives, the DWP has laid out 10 design principles. Six are fixed, such as around data security and use of open standards, while four are subject to further review as technology advances and the service matures, including whether dashboards are ‘presentational only’.
Only those that abide by these principles and – initially at least – are FCA-regulated businesses will be permitted to offer dashboards. The DWP is keen, however, to enable fintech firms to offer dashboards and will work with the regulators to ensure consumer protections are in place to support this.
One final – and key – question is: where will the money come from? The government committed £3.35m in its Autumn Budget to make dashboards a reality, including making new legislation, delivery group start-up costs and state pension data integration.
Finance for the digital architecture and governance for dashboards, along with development of the non-commercial dashboard, will come from the financial services levy and general levy on pension schemes, plus some central government funding.
The ‘ecosystem’, set out below, that has been proposed by the DWP – to show how the component elements of the dashboards will work – is a great step forward. It gets us another step closer to delivering this critical initiative for consumers. There is a lot of work ahead, though, and the challenge for all parties will be to maintain momentum throughout 2019 and beyond to bring this to life.