Steve Webb, from insurer Royal London and formerly pensions minister, looks at the dashboard’s pitfalls and potential.
Key points
Although the dashboard is likely to evolve in stages, it will end up being comprehensive, so worth getting started now on sorting out your data.
For DB schemes, do you have processes in place that could swiftly provide information about deferred members? For DC schemes, could you supply real-time valuations of pension pots?
Expect disruption! Once individuals know what they have and can compare and contrast their different pensions, they will have lots of questions for you, and they may well want to move assets around, including out of your scheme.
A comprehensive dashboard, where individuals can see all of their pension rights in one place, is unlikely to happen all in one go.
While some scheme membership data ought to be in relatively good order and easy to prepare for a dashboard, this is far from universal.
The government and regulators are therefore likely to prioritise certain sorts of data simply to get something off the ground.
Need for compulsion
The best bet seems to be that information about rights accrued under automatic enrolment will be the first to be displayed, hopefully alongside information about state pension rights, which is pretty fundamental to any credible dashboard.
The second thing to be aware of is that the government has so far shown no great enthusiasm for compulsion on schemes and providers to supply data to a dashboard. The Pensions Bill announced in the recent Queen’s Speech contained no such measures. Yet it is hard to see how a dashboard can work without compulsion.
For example, for those who run small closed defined benefit schemes there will be a cost to getting themselves ‘dashboard-ready’, therefore it is difficult to see them wanting to do this voluntarily.
While data may be readily available for existing pensioners and for active contributors, figures for the rights of deferred members may not be available off the shelf, and DB schemes need to think how they would produce that data if there were, in due course, to be a legal requirement to do so.
In a similar vein, defined contribution schemes will have to think about how they would supply data that is more up-to-date than that contained on an annual statement, as there will be considerable pressure to move towards real time data on the dashboard as far as possible.
How many dashboards?
A third unresolved issue is whether there will simply be a single, semi-official dashboard, which is the only place where you can go to see your data, or whether there could be a variety of front-ends that simply pull in data from the dashboard system. If the latter, this has the potential to be particularly disruptive.
Those who primarily run legacy schemes could find once individuals can see where their various pension rights sit, they might become interested in consolidating them.
Those who run legacy schemes could find once individuals can see where their various pension rights sit, they might become interested in consolidating them
It is hard to think that this will not result in a flow of funds out of legacy schemes, particularly if rival providers are able to run their own dashboard interfaces that could deliberately nudge people in that direction.
One dashboard model that works well in other countries is to avoid having a huge – and potentially hackable – centralised database where all the information about every citizen’s pension rights is stored.
Instead, there could be a ‘query’ system, where when someone logs in to the dashboard a digital query is sent to each pension scheme and the scheme will have to reply if there is a positive match between the person making the inquiry and a holder of rights under the scheme. This data will be presented through the dashboard but not necessarily retained thereafter.
This approach would, of course, mean that schemes will need to make sure they know exactly who is a member of their scheme and have up-to-date membership records.
A pension dashboard could be a huge boon to consumers, helping them to find lost pension pots, plan better for their retirement, and potentially reallocate their pension assets.
But there is no doubt it will also be a costly and disruptive exercise for providers and pension schemes.
Steve Webb is director of policy at Royal London
