We can all agree the goal of the Pensions Dashboard Programme is worthwhile. Being able to look at a single information source that encompasses all our pension savings, and the estimated income they will produce, would be infinitely preferable to the reams of information in vastly differing formats – not to mention impenetrable language – people currently receive.
Unfortunately, it’s not as simple as gathering all the information in one place. The PDP recently published three documents intended to update us on progress. Although some progress was evident, these served as a reminder of just how difficult delivery was going to be.
The PDP has identified a universe of around 52 million adults with pensions that could be included in the dashboard, and 43,000 providers and pension schemes in which they could be invested, leading to an inconceivable number of individual permutations.
We need pensions engagement, so where is the dashboard?
It is essential the dashboard system provides the right information to the right people. It therefore needs a Pension Finder Service that can collect data in a way that is secure and cannot be accessed by the wrong people. Given the inventiveness and constant evolution of scamming activity, this will be an ongoing challenge both before and after delivery of the dashboard, involving one or more approved identity services. The Pensions Regulator and the FCA will oversee this.
Legislation
The Pensions Dashboard Prototype Project found most end users would only value a dashboard that provided information about all their pensions. The PDP has therefore chosen to follow a strategy that will provide basic information from every scheme, rather than one that provides more in-depth information from just a few.
Legislation will be introduced via the Pension Schemes Bill requiring all schemes and providers to make the necessary data available to the Pension Finder Service when it is set up; however, the compulsion to apply is likely to be staged over a three- to four-year window. It is also worth pointing out crystallised arrangements are not currently in scope, although the majority of individual plans should be in a position to participate on a voluntary basis.
To facilitate this, the initial dashboard will be required only to offer a ‘find and view’ service that provides the information already required for annual statements. This includes details of the arrangement in which pension rights are held, and an estimation of retirement income as provided by the scheme. The dashboard itself must not provide the income projections but pass on only the data from the scheme.
Standard format
Different pension arrangements provide different information in different formats. Some of this is driven by legislation – for example, defined benefits versus defined contribution structures – but much of it comes down to the scheme’s individual communications. As the dashboard is only passing on this information, it will be necessary to agree a standard format that is both consistent and simple for users to understand.
TPR clarifies difference between DB and DC transfers
The PDP intends to draw on work carried out in the government’s Simpler Annual Benefit Statements initiative, and has also created a glossary of terms to address this problem. It should be acknowledged, however, that this issue has been rumbling on for years and it will take a lot of negotiation skills to get the industry, regulator and consumer ducks in a row.
It is not going to be easy but ultimately the government, industry and society all need people to start taking control of their retirement planning. The state pension is under severe stress from the increasing number of individuals reaching state pension age, and final salary schemes are gradually closing, leaving most people dependent on a We can all agree the goal of the Pensions Dashboard Programme is worthwhile. Being able to look at a single information source that encompasses all our pension savings, and the estimated income they will produce, would be infinitely preferable to the reams of information in vastly differing formats – not to mention impenetrable language – people currently receive.system that requires them to make their own choices.
If the dashboard project were to fail, people would start to look at other ways to save. That would be no bad thing as a complement to pension saving, but it could be disastrous if it became the default. Based on the behaviour of non-advised individuals who have access to their pensions for the first time, these other solutions are likely to be short-term, cash-based and more exposed to scam activity.
Fiona Tait is technical director at Intelligent Pensions
