Pension provider calls for legal duty to be placed on dashboard operators

An independent report commissioned by not-for-profit mastertrust The People’s Pension, and written by Dominic Lindley, an independent consultant specialising in financial services, consumer protection and conduct risk issues, has set out what potential dashboards could achieve in the long term for pension savers and consumers.

It has to be understandable. If we don’t get this right at the outset, then it won’t matter what we do with it in the future because people will not trust it. We have to make it easy for the consumer to use

Geraldine Brassett, PASA

Published this week, the report highlights the need for strong consumer protection legislation and regulation when pensions dashboards move initially from a single non-commercial version to multiple commercial dashboards.

The Lindley report states that a single government-run dashboard has the advantages of promoting trust and offering a consistent and impartial service to retirement savers. It adds that it would be easier to oversee and control than multiple commercial ventures.

It also notes that multiple dashboards could subsequently augment the reach of the service, while encouraging innovation and facilitating the integration of pensions with other services in the public interest. However, the report stresses that effective consumer protection legislation and regulation will be critical.

Creating a big market for services

Gregg McClymont, director of policy at The People’s Pension, said: “Government figures suggest a huge number of people, up to 18m with a workplace pension entitlement, could eventually access pensions dashboards, creating a big market for services with 18m people's data sitting on dashboards over time. The opportunities are vast, but so is the potential for consumer detriment.”

He noted that the government's intention is to have a policy of multiple dashboards where commercial providers can offer services.

Mr McClymont used the Port Talbot steelworkers' pension scandal as an example of how easily things can go wrong without strong consumer protection rights for savers.

He said that equally, with the dashboard project, “millions of people will have their pensions entitlements online and inevitably there are going to be services being sold to them, not least the DB to DC transfers, so the potential for detriment is significant".

The report calls for information on charges to be disclosed on pensions dashboards from the outset, so that savers have a clear legal right to all of their financial data. It also calls for the creation of a pensions dashboard implementation authority, which should be given a clear statutory remit to act in the best interests of consumers.

According to the report, the pensions dashboard has the potential to drive higher levels of consumer engagement and transform the pensions and savings industry, but only if it serves the interests of consumers.

The People’s Pension has supported the report’s call for the government to place a fiduciary duty on dashboard operators to put customers' financial interests before their own. 

Meeting consumers' needs

Kate Smith, head of pensions at Aegon, warned that significant effort needs to go into delivering a Single Financial Guidance Body-sponsored dashboard and commercial dashboards that meet consumers’ needs.

She said: “Being a pensions dashboard provider must be a regulated activity. Unauthorised firms must not be allowed to become dashboard providers and put members’ data and pensions at risk.”

Ms Smith noted that some outstanding issues need to be delivered, including a definition of standards, a digital identity service, regulation, governance and resolution of the funding model.

“Consumer protection is absolutely critical, and regulation will drive market standards, giving consumers the trust and confidence to access pensions dashboards. There must be no shortcuts around regulatory and capital requirements for associated activity,” she added.

Ms Smith said that to be a success, the pensions dashboard had to include the state pension and “have a critical mass of pension providers and schemes willing and able to supply data, initially on a voluntary basis".

“The legislation is a deal breaker,” she said, emphasising the importance of setting out a clear roadmap of when all pension plans and providers must supply data to pensions dashboards.

"Without this we run the risk of consumers losing confidence in pensions dashboards, and possibly not returning, undoing all the effort achieved to date,” she added.

TPR or FCA?

The report states there should be a duty upon those operating a pensions dashboard to act in the best interests of consumers, similar to the obligations for fiduciary duty. 

But who will regulate this? Mr Lindley’s report suggests the Financial Conduct Authority could perform this role, given it already regulates services giving savers an aggregated view of their banking data.

The People’s Pension, on the other hand, states there is a strong case for the Pensions Regulator to regulate.

Patrick Heath-Lay, chief executive of The People's Pension, wrote in the report's foreword that this is because the majority of assets that will come on to the dashboard will be from trust-based pension providers, who are already operating to a fiduciary standard.

Make it easy for consumers

Geraldine Brassett, chair of the Pensions Administration Standards Association's industry policy committee and chair of PASA's pensions dashboard working group, said: “PASA is committed to the introduction of the pensions dashboard, and has offered help and assistance to support the project as it evolves.”  

She added that “the report is endorsing what is coming from the government's Department for Work and Pensions. It is supportive, and it does put the consumer at the heart of everything, and at the end of the day that is what the dashboard is all about”.

Ms Brassett said: “There are some immediate challenges that we need to address – data being one of them – and getting schemes’ on board because, for the dashboard to be successful, coverage is essential as to what consumers see on the dashboard.

“It has to be understandable. If we don’t get this right at the outset, then it won’t matter what we do with it in the future because people will not trust it. We have to make it easy for the consumer to use.”

She added that employers with multiple schemes would need to think about the implications of phasing and how it is communicated to their employee members. It is now common for an individual to be a member of multiple arrangements as part of one employment.

“We expect there to be a significant demand on administrators over the next 12 to 24 months, particularly those that provide services for DB schemes as well as DC, as they deal with the challenges and demands arising from GMP [guaranteed minimum pension] equalisation,” Ms Brassett said.

She added that the timescales proposed for the dashboard are likely to be achievable.

However, she said: “PASA asks that information is shared regularly with the industry and that we receive clarity on the proposed data set as early as possible. This will allow time for administrators to ensure data is clean and up to date, which will help to maximise member confidence.”