28 February 2022
This article was written before the 31 January 2022 draft regulations were published, and originally published in Professional Pensions on 18 February 2022.
In early 2022 we expect to see draft regulations from the Department for Work and Pensions on pensions dashboards.
These will include the dates by which different categories of pension scheme will have to supply data, and a definition of the types of data to be supplied.
Although schemes and sponsors may be tempted to regard this as largely a technical exercise about data manipulation, this would be a mistake. In my view, dashboards are likely to trigger a profound behavioural response by members, the multi-billion pound implications of which for our industry could be highly disruptive and require careful forward planning.
The first important point is that there will be market participants who will have a big incentive to increase the number of scheme members who visit a dashboard. Although international experience on consumer engagement with dashboards is variable, in the UK we have a new breed of businesses whose survival depends on encouraging people to consolidate their individual pension entitlements onto their platform. These businesses are high-profile and comfortable in the internet age, and they can be expected to boost interest in pension dashboards as soon as they are available.
Secondly, the UK model has always been about pensions dashboards - in the plural. As well as the ‘official' dashboard hosted by the Money and Pensions Service, there are likely to be multiple private sector dashboards and this is likely to increase the number of potential ‘points of access' where individuals may be nudged to visit a dashboard.
The Pensions Dashboards Programme is already working with three different types of organisation - an insurer, an open banking platform and an open data fintech - to work through how each might run their own dashboard. And if high street banks decide to link their banking apps to pensions dashboard interfaces then it may become relatively straightforward for people to check their pension data as part of routine interaction with their bank rather than having to make an effort to do so. All of these factors will reduce barriers and increase take-up of dashboards.
Once people can see their data on a dashboard, how will they respond?
Human nature, on seeing that you have multiple pension entitlements, is to want to put them all in one place. And if a friendly online business offers to help you do it all in a relatively pain-free way, why not? Although the financial pages will be full of warnings about the risks of consolidation, most people will simply want one easy-to-access pension.
If this were to happen at scale we could easily see many billions of pounds moving around the pension system (with added potential for scammers to get a slice) in ways that have not so far happened in a world of inertia and automatic enrolment. Defined contribution pensions will be the easiest to consolidate and will no doubt be the immediate focus, but dashboards can also be expected to stir up renewed interest in defined benefit transfers as well.
When dashboards go live people will also have huge numbers of questions. They will want to know about ‘missing' pensions that they expected to see, and they will want to know about pensions that have a different name to the one they were expecting (perhaps because of a corporate restructuring after they left employment). They will also have questions about pension valuations, especially where the figure on the dashboard is different to the figure on the last statement they received, and they will certainly have questions about how to access their money. Pension schemes and the HR and pension departments of sponsors can expect to be very busy once dashboards go live.
Although the go-live of dashboards to the general public is probably a couple of years away at least, the pensions world needs to wake up now to the potentially huge implications of dashboards and to plan accordingly. The earthquake may have been delayed, but it's coming.
This article was originally published in Professional Pensions on 18 February 2022.
On 31 January 2022, DWP published its draft regulations and supporting documents. Our further thoughts on the challenges which this whole process will present for schemes can be read here.