Calls for a ‘rethink’ as dashboards call for input closes

The PDP published its call for input on staging at the end of May, seeking industry views on its proposals for a three-wave implementation process. 

Under its current plans, wave one would see the largest schemes (of 1,000-plus memberships), followed by “medium schemes” (100-999 memberships) in wave two, and “small and micro schemes” (99 memberships or less).

This orphaned pension problem is only going to increase due to a rise in job changing, particularly as a result of the coronavirus pandemic, making it an even more urgent issue

Karl Lidgley, Hymans Robertson

Wave one would be further subdivided into three cohorts, with master trusts and Financial Conduct Authority-regulated providers in first, coming onboard in spring 2023; defined contribution schemes used for auto-enrolment in the second group, onboarding later in 2023; and all remaining occupational schemes with 1,000-plus members following in the third cohort.

Only once the bulk of wave one schemes have successfully connected to the pensions dashboards would onboarding of the second wave begin. The PDP acknowledged that this would be unlikely to happen before 2024.

When staged, “a pension provider will need to be connected into the ecosystem and be ready to receive find requests from dashboards, undertake matching processes to locate a saver’s pension, register found pensions, and return pension savings information for temporary display to users at dashboards”, the PDP’s call for input explained.

The PDP sought views on the comparative merits of two dashboard models: ‘find-only’ and ‘find-and-view’.

Of the first, the PDP said: “One option to deliver a useable service sooner, while also taking into account deliverability challenges, could be to phase compulsion duties to first require schemes and providers simply to connect and register found pensions, and then return value information (estimated retirement income and accrued value) at a later date.

“It could support wide coverage of pensions findable earlier, achieving one of the policy aims for dashboards (reconnecting savers with lost pots), and potentially enabling public launch of a find-only dashboards service at first, with a full find-and-view service to follow,” it explained.

Based on evidence and analysis, the PDP said it was operating on the assumption that a find-and-view model would be preferable, as a find-only model would not enjoy the same consumer confidence as a dashboard with find-and-view functionality. 

Find first, view later

Commenting on the closure of the call for input, a range of industry bodies welcomed the general thrust of the PDP’s proposals, but raised a number of outstanding problems.

Karl Lidgley, client manager third-party administration at Hymans Robertson, said: “The fact that a vast number of pension plans are lost or unclaimed is a vital factor in the timing of the stages for the rollout. 

“The [Association of British Insurers] estimated that there are 1.6m lost pensions plans, with the government predicting there will be 50m dormant and lost pensions by 2050.

“This orphaned pension problem is only going to increase due to a rise in job changing, particularly as a result of the coronavirus pandemic, making it an even more urgent issue,” he explained.

Lidgley suggested that the initial dashboards should focus on the “find” function, with the ability to “view” developed later.

“A simple find service will allow consumers to identify their pension providers and put them into contact with the administrators. This could be rolled out in the timeframes outlined in the call for input and allow the industry time to develop a standard approach to reporting the estimated retirement income required for the full view functionality,” he said.

Pensions Expert reported late last year on the first calls to drop ERI from the first iteration of the pensions dashboards, with experts citing the difficulties posed by a lack of data and standards.

“The dashboards programme is currently relying on existing disclosure regulations that don’t provide a uniform way of displaying ERI information to members,” Lidgley said.

“Without this, members will be unable to understand and compare their benefits, which could lead to poor decision-making and disengagement for pensions dashboards.

“It is vital that this standard and more uniform ERI presentation is easy to understand and easy to compare for members and agreed by all providers from the start. Which is why we believe there should be clear guidance, and more legislation to ensure that this is consistent.”

The Society of Pension Professionals likewise called ERI provision “one of the bigger obstacles to be overcome”.

It argued that “it is essential as early as possible in staging that the precise legal basis for providing data is established, specifying “how the dashboard requirements interact with any [General Data Protection Regulation] constraints” and detailing “universally applied matching requirements”.

Paul McGlone, former president of the SPP, said: “The issue of ERI is particularly complex and must be resolved in good time if the implementation of the dashboards is to be a success.

“But there are a range of wider areas that also need clarification before the industry can start work in earnest on delivering to the proposed timescales.”

Time for a rethink?

Because the difficulties around ERI and other as-yet unaddressed problems are likely to delay the introduction of pensions dashboards still further, LCP argued in its submission that the PDP’s concerns about low public tolerance for a find-only dashboard should be revisited.

It argued that an “early win” would be a dashboard that gives people an overview of all the pension schemes of which they are a member, thus reuniting them with “lost” pension pots as soon as possible.

There are several advantages to this approach, LCP said. For instance, dashboards are most likely to be used by those closest to retirement, who may not be able to wait “several more years” for them to go live.

“An early launch of dashboards with membership data will generate lots of ‘good news stories’ as people find lost pensions, [which] will generate positive interest in the dashboards after years of negative coverage around delays,” it continued.

Further, “even smaller schemes can reasonably be expected to provide lists of their members, which means that wider coverage can be achieved earlier by going for a find service first”, LCP added.

Besides which, a “big bang” switch on of the dashboards could lead to a “capacity crunch” for schemes and employers, which may be inundated with member questions and requests. 

The consultancy therefore suggested a “phased switch-on”, with only those closest to retirement initially able to access the data. Coverage could then be expanded gradually to include younger members.

LCP partner Sir Steve Webb said: “The determination to go live with estimated retirement incomes as well as memberships could actually delay the launch. Reuniting people with lost pensions is a huge potential positive from dashboards and this shouldn’t be delayed any longer.

“We also need to recognise that when people see the data on the dashboards they will have dozens of questions, and presenting them with value data will greatly increase the pressure on schemes and employers to have the capacity to handle them. A phased approach to accessing the dashboards would also be a good idea.”