Buyouts and dashboards – don't miss the boat

Pension schemes have until 8 August 2024 to apply for an extension in respect of the statutory deadline of 31 October 2026 for connecting to the pensions dashboards infrastructure.

This extension could save significant time and cost for schemes in their ‘endgame’. However, whether schemes meet the criteria for an extension takes much thought and detailed planning.

Justifying an extension

The regulations permit the trustees of a scheme to apply for an extension where they “had embarked on a programme to transfer the data held by the pension scheme to a new administrator” before 9 August 2023.

As well as administration switches in ongoing schemes, this potentially catches whole scheme buyouts, given that they will result in an insurance company taking over the administration of benefits.

So, where the buy-in or buyout was in motion by mid-2023, there may be grounds for an extension.

Eligible schemes must establish that an extension is justified because it would be “disproportionately burdensome” to meet the 31 October 2026 deadline or that it would “put member personal data at risk”.

Again, a buyout project may fit the bill on the basis that large amounts of personal data will be passing between the scheme and insurer, and combining that exercise with getting dashboard-ready could lead to an increased risk of a data breach.

It is arguable that running these processes in parallel would be disproportionately burdensome on trustees given that the insurer will already be making its own preparations to meet the dashboard deadlines.

Key dates

Whether an extension will be relevant and helpful will depend upon the interaction of three dates:

• The scheme’s likely buyout date
• The scheme’s ‘connect by’ date based on the Department for Work and Pensions’ (DWP) staged timeline
• The statutory deadline of 31 October 2026

If the buyout date is expected to complete before your ‘connect by’ date, you can rely upon regulation 3(3) of the Pensions Dashboards Regulations, on the grounds that the number of relevant members will have fallen to zero before 31 October 2026. No action will be necessary, unless there is a risk of the buyout being delayed.

If the buyout date is expected to complete between your scheme’s ‘connect by’ date and 31 October 2026, you can again rely upon regulation 3(3), but you should also engage with the Pensions Dashboard Programme and the Pensions Regulator to explain why the scheme will not be connecting.

If the buyout date is likely to complete after 31 October 2026, an application for an extension of up to 12 months can be made to the Secretary of State by completing a standard form and emailing it to the DWP’s dedicated email address.

Other considerations

For any schemes nearing buyout, it is important to assess how resilient the completion timetable is in order to form a realistic assessment of when it will most likely complete. This should then be tested against the regulatory timeline described above.

All of the above should also be considered in light of guidance on deferred connection, and connection guidance, which trustees must also have regard to.

None of this applies where a scheme had less than 100 active, deferred or pension credit members at a reference date in 2023 or 2024, as these schemes are currently exempt from connecting.

Matthew Giles is a partner at Squire Patton Boggs.

Further reading

DWP confirms timeline for dashboard connectivity (26 March 2024)

An end-of-term report on pension dashboards (5 June 2024)