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Article | Pensions Briefing

Pensions Dashboard – the buffering is over

Bringing together a member’s pensions in one place will be simpler in concept than in practice

Pensions Corporate Consulting|Pensions Risk Solutions
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By Paul Barton | March 15, 2019

With the Pensions Dashboard implementation now approaching, Paul Barton explores how the framework will operate and what demands this will place on schemes.

The concept of the Pensions Dashboard has been around so long it has begun to feel like a mirage. But the Government is now taking decisions that are expected to give schemes three to four years from launch to prepare their information for inclusion in this nascent IT project. Paul Barton considers the issues for schemes and shares the findings of Willis Towers Watson’s recent survey of schemes administered in-house.

All the luxury cruises or baked potato suppers your working life amounts to pixelated upon the laptop screen.

It is easy to see the attraction of a Pensions Dashboard from a member’s perspective – all the information you need to plan your retirement in one place at the same time – all the luxury cruises or baked potato suppers your working life amounts to pixelated upon the laptop screen. Guy Opperman, the Minister for Pensions and Financial Inclusion at The Department for Work and Pensions (DWP) is certainly enthused and the December consultation sets out how the DWP envisages the private sector making the dream a reality.

At a high level the DWP proposes that Master Trusts will be able to supply data from 2019-20 with defined benefit (DB) schemes participating within three to four years of the launch. While data submission will initially be voluntary, the DWP expects to legislate to make this compulsory "when parliamentary time allows" – strongly implying that the three/four year timeline will affect nearly all schemes.

But with the Government putting the onus on the pensions industry to deliver the project, there are still many unanswered questions about the specific information schemes and providers will need to furnish to the Dashboard and the extent to which this information will be useful to members. For schemes, it raises questions about how easily current information can be presented in a specified fashion and the level of checking required. It looks as if the rewards are all the member’s while the toil is the scheme’s.

How much Information?

In trying to define what members need to know, it’s impossible to avoid further questions: there are always possibilities and options in the land of freedom and choice. It seems obvious that the name and address of the scheme in which the pension is located and an amount of benefit would be the starting points for initial versions of the Dashboard (plus signposts to sources of further information).

However, the pension amounts held by schemes may be at different dates; typically, the DB pension amounts would be at date of leaving the scheme, whereas the defined contribution (DC) pots would specify a current market value. Any further levels of detail that will be required have not been identified and will require some consensus to have emerged from the recent consultation before these can be laid down in law.

Once that information framework has been determined, then significant extra work on the part of schemes will be needed as schemes will have to provide the information in a consistent Dashboard-ready fashion. For instance, will DB pensions have to be at specified dates (solely date of leaving or one of: the end of the last scheme year, today, normal retirement age, the member’s State Pension Age or another specific age?) and should levels of costs and charges within DC schemes be included? The consultation mentioned the possibility of transfer values being provided, though the jury was still out on this.

A balance will need to be struck between the information individuals want to see and what schemes can readily provide.

Our view is that it will be best to tackle this incrementally, bringing in more basic information to start with and moving towards more detailed information following a successful bedding-in; but a balance will need to be struck between the information individuals want to see and what schemes can readily provide.

Our Survey Says …

To inform our response to the Government’s consultation Willis Towers Watson surveyed DB schemes with in-house administration, over half of whom also administer a DC scheme – there are relatively few such schemes but they are often large so of the 17 responses, over two-thirds had assets in excess of £1 billion. In contrast to the Government’s optimism, this group was more sceptical about the Dashboard’s ability to generate engagement, with less than one-third thinking it would lead to a major improvement in engagement and two-fifths disagreeing that it would help.

How strongly do you agree with the following statements about the impact of implementing the proposed pensions dashboard on your scheme?

Pensions dashboards will increase schemes costs
Figure 1. Highlights of Willis Towers Watson’s survey of in-house administrators on Pensions Dashboards

However, there was a majority view that the Dashboard would be a major cost for their schemes to implement with three-quarters of survey respondents either agreeing or strongly agreeing that this would be the case. The main direct costs can be split up as follows:

  1. Initial set up costs of interface and matching functionality
  2. Ongoing maintenance costs including provision of any management information
  3. Data cleansing costs – which will be dependent on detailed data required, time lag allowed for updates and current quality of electronic data. This is likely to be higher for DB schemes
  4. Potential automation of calculations such as projecting pensions to a particular date

Two-thirds of respondents were very or extremely likely to want to use external support to both set up the IT infrastructure and to automate calculations.

Our survey found that a significant majority of schemes were concerned that automating projections of pension amounts and of transfer values would be challenging given that the resolution of GMP issues is likely to use up much administrative capacity in the next few years. Given this, it is perhaps unsurprising that two-thirds of respondents were very or extremely likely to want to use external support to both set up the IT infrastructure and to automate calculations if these are required.

Operational Structure and Data Protection

The newly-created Money and Pensions Service (MPS) will oversee the Dashboard project including setting up the entity to provide a Pension Finder Service that will act as the search engine to find individuals' pensions records, with the schemes/providers then passing details to the Dashboard(s).

The first Dashboard will also be hosted by the MPS. Once the regulatory framework is in place, then other industry dashboards can be created.

To address data protection concerns, dashboards will be used for presentation purposes only and would not store pension data nor alter the source data. The proposal is that members would need to contact the pension scheme directly to make changes to their details, though we argued that if this could be seamless that would be a benefit to both members and schemes.

With the Government reluctant to commit funds to the project beyond the work to link in the State Pension, and the Dashboard having to be free to access for members, the cost burden looks likely to fall on providers and potentially also employers.

The consultation has brought a lot of the challenges out into the open, but it has also illustrated that the vision of a Pensions Dashboard retains its allure. While we await further news from the DWP on the details and timetable, we believe the consultation will help the Government to avoid underestimating the time needed to overcome these challenges.

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