On the surface, the pensions dashboard concept couldn’t be simpler: individuals can see all their pension savings in one place, so that they can understand how much money they will have to retire on and act accordingly.
But specifying how those goals will be achieved has proved anything but simple. To date the project has raised copious questions about scope and functionality: Should pension funds be compelled to submit data to the dashboard from day one? How will defined benefit schemes be handled? Should there be one dashboard, or multiple dashboards? How will members’ data be protected? Should individuals be able to carry out transactions such as consolidating pensions or updating addresses from the dashboard….? The list goes on.
The underlying fact remains that a dashboard (or multiple dashboards) is badly needed to empower individuals to plan for their future and make decisions about retirement. As individuals’ working lives become more complex, the risk of losing touch with tranches of their pensions wealth increases. A dashboard helps to offset that risk.
The government’s much-awaited consultation on the dashboard was released at the end of 2018 and closed in January this year. This gave some much-needed clarity to what ‘phase one’ of the might look like, and what pension schemes need to do now to prepare for its implementation.
What can we expect?
The consultation points to a pragmatic first iteration of the dashboard, focused on getting the broadest possible scheme coverage rather than introducing complex functionality. It will act more like a pension finder offering signposting to further information and guidance rather than a fully functional dashboard.
There will be no aggregated pension values and it also won’t be possible to take actions such as consolidating pension pots or comparing charges at this stage.
However, the consultation does set out a very clear architecture and ‘ecosystem’. This will be fundamental for helping schemes understand how the dashboard will operate and what will be expected of them as they prepare.
What should trustees do?
Schemes such as master trusts will be expected to provide data from 2019/20 onwards, but the consultation is still investigating timescales for others to participate. While government has indicated it will pass legislation to compel all schemes to provide data that can only happen when parliamentary time allows, so until then the timescales will remain unclear.
Even though the timescales are still be clarified, DC trustees can start to prepare now. The requirements for schemes are best summed up as: being able to supply the correct fund value, to the right member, on their request.
Supplying the correct fund value – The consultation suggests fund values will replicate information already produced by schemes for annual benefits statements and other correspondence. As such, trustees of modern DC schemes should need to do little additional work at this stage.
Those trustees with hybrid schemes should probably adopt a wait and see approach as it ‘s not clear how a DC current fund value and a DB pension entitlement will be presented to members.
Getting information to the right member - Pensions dashboards will be dependent on the quality of common data (name, address, date of birth, National Insurance number etc.) that schemes hold on their members. This information will be used to identify the correct pension pot and display its value on the dashboard.
The Pensions Regulator is already focused on making sure schemes maintain good common data and carry out regular checks – but this will become even more important with the implementation of the dashboard. If common data is missing or inaccurate, it might not be possible for individuals to find their pensions. At best, this means they will have an incomplete picture of their savings, and at worst could leave them worried that some of their pension savings have gone missing.
Trustees will need to collaborate closely with their administrators to make sure their data is as clean and complete as possible. Enabling and encouraging members to update their personal details online is one way to achieve this.
Providing information on demand - Another challenge that the dashboard will present is the ability to execute real-time data exchanges, so that fund values can be provided when the member requests them. No data is held within the dashboard itself – it will be held and supplied by the schemes using open standards.
Using a consistent set of open standards should mean that there will be plenty of expertise on hand to support schemes as they prepare to supply data to the dashboard. However, trustees should seek reassurance from their administrators. Some, like Aviva, have a wealth of experience and IT systems in place, while real time exchange of information might require development for others.
Although it is early days for the dashboard, the recent consultation shows what we can expect over the next three to four years. The dashboard can and should become an integral part of individuals’ retirement planning – but it will only be a success if schemes are able to deliver the information that members need. This first phase of its development will be crucial in getting those foundations right.