Pensions Dashboards Regulations 2022
(2 years ago)
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Baroness Stedman-Scott
That the draft Regulations laid before the House on 17 October be approved.
Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I am pleased to introduce this instrument, which, subject to approval, will create the framework within which pensions dashboards will operate.
Pensions dashboards are digital tools that will present individuals with their pension information brought together from multiple sources. At the touch of a smart- phone, this information will quite clearly and literally be at members’ fingertips.
The Pension Schemes Act 2021 gave government the powers to create these regulations but this is a complex programme, and as such, the requirements are manifold. The regulations place requirements on registerable GB-based occupational pension schemes with over 100 active, deferred or pension credit members and specify when these schemes must connect to the Money and Pensions Service, or MaPS, as it is also known.
The department for communities is expected to make corresponding regulations for Northern Ireland and, once connected, pension schemes must follow the requirement to find pensions and send the relevant information to an individual’s chosen qualifying pension dashboard service.
The regulations provide that the Pensions Regulator may take enforcement action in relation to pension schemes that do not comply. The regulations will also cover the requirements to be satisfied for a pensions dashboard service to be a qualifying pensions dashboard service. This includes connection and functionality, display of new data, reporting and monitoring of the dashboard and enabling an independent person to audit the providers’ dashboard. Further to this, the Financial Conduct Authority has published final corresponding rules in relation to the providers of personal stakeholder pension schemes and will be consulting on a regulatory framework for qualifying pensions dashboard services later this year.
The regulations, in combination with a planned order to amend the Pensions Act 2004 will enable MaPS and the TPR to disclose information to each other in connection with dashboard functions only. This will support MaPS and the regulator in their pensions dashboard programme and compliance roles respectively, and support the secure delivery of the ecosystem and pensions dashboard services. The Data Protection Act 2018 and UK general data protection duties continue to apply to the sharing of information about an individual.
I should like to revisit why we need pensions dashboards and their potential to change people’s relationship with their pensions. We all know about the huge success that automatic enrolment had in getting people saving into a pension. Millions of people are now saving. There are about 27 million people with private pensions wealth not yet in payment. Research by Aegon found that almost three-quarters of UK adults have multiple pensions, as people move around the labour market throughout their working life, but some of those people may not know who their pension is with, what their pension is worth or, indeed, how many pensions they have.
Pensions dashboards have the power to change all that and we have conservatively estimated that reuniting people with lost pots alone could be worth £541 million to individuals over 10 years. It could be much more. The Pensions Policy Institute estimated in its most recent paper on lost pots that the total value could be up to £26.6 billion. Instead of relying on a box of paper under the stairs, pensions dashboards will help individuals find their lost and forgotten pensions quickly, easily and all in one place. The information that pensions dashboards will provide—alongside guidance or, where appropriate, advice from an FCA-regulated adviser—will help equip people to plan for their retirement and make informed decisions about their financial futures.
Among participants in a recent Ipsos MORI survey, nearly three in five people said that they were likely to use a pensions dashboard. This is a great starting point. We are in a digital age and now is the time to make pensions dashboards a reality. We are setting up a brand-new digital service, which will connect thousands of individual pension schemes covering millions of memberships. As you would expect, a huge amount of work and thought has gone into developing these regulations. This goes beyond government. Throughout, we have worked with our delivery partners in the pensions dashboards programme: the Money and Pensions Service, the Pensions Regulator and the Financial Conduct Authority. I thank them for their expert input into this cross-cutting project. We have also gained insight from those in the pensions industry and consumer groups through the two public consultations and other fora. I thank all those who contributed and helped shape dashboards policy.
The delivery of pensions dashboards needs to be both timely and operationally manageable for both the pensions dashboards programme and the pensions industry. The regulations set out the phased approach known as staging to connect different categories of schemes to MaPS. By prioritising schemes according to type and membership, we can maximise the level of member coverage on pensions dashboards in the shortest possible timeframe. Schemes will connect to the digital architecture of MaPS—the technology that underpins dashboards—and all parties and technical services that connect to it from the dashboard ecosystem.
Pension schemes should already be considering how they intend to meet their obligations. I urge all schemes to take preparatory action immediately to consider how they will connect to dashboards, to decide how they will find savers in their records, and how they will provide pension information. I know that all of us across the House are eager to see dashboards made ready for the public. The point at which this will happen is referred to in the regulation as the dashboards available point. The Secretary of State will issue a notice at least six months ahead of this point, having considered matters such as the coverage of memberships and service levels. This notice will give the pensions industry time to prepare to answer queries resulting from people engaging with their pension information.
Once dashboards are made available to the public, what will people see? We have taken an actively cautious approach to understand behaviour and protect consumers as dashboards are introduced. This is why dashboards will present individuals with relatively high-level pension information. It will not be possible to transact—for example, transfer or consolidate—through the digital architecture. On receiving an individual’s request to find their pensions information from the dashboard’s digital architecture, schemes must provide administrative data to the individual. This includes basic information about the pension, including how an individual can contact their scheme. The individual will then see information about the value of their pension, both as an accrued value and as an illustration of a projected retirement income. State pensions information will also be displayed, giving individuals a full picture of their pensions. Contextual information and signpost data will sit alongside these values to help users understand the information displayed.
This is a digital service. As such, we must recognise the need for speed. Trustees or managers must complete matching immediately and, where a positive match is identified, immediately provide administrative data to the individual. Where values have been provided on a recent benefits statement, or where a calculation has been made using the same methodology in the last 12 months, members will also receive value data, contextual information and signpost data immediately.
To balance responsiveness with deliverability for pension schemes where there are not values from benefit statements on hand, the regulations set out that in cases where all the benefits provided to a member are money purchase benefits, information will be returned within three working days, and other types will have up to 10 working days.
I stress that this is a starting point and I would like to see the pace quicken in time. However, the speed and ease with which individuals will be able to see their pension information is a huge step forward from the current disclosure requirements, following a request for a benefits statement, which allows schemes up to two months to return information—something completely out of pace with the digital age.
Throughout the passage of the Pension Schemes Act 2021, the Government stated their commitment to protecting the users of dashboards. Consumer protection does not rest in a single place. Each element of the pension dashboard ecosystem has its part to play in ensuring that consumer protection is integral to all steps of the dashboard journey. The foundation of the design is one of consent, with users given the ability to provide and withdraw their consent at any stage, putting them in control of their data. The design of the ecosystem is such that there is no need for a central repository of users’ personal information, and the digital architecture has been built to prevent unauthorised participants entering.
The ID-verification service within the architecture will also protect consumers by reducing the risk of pension schemes releasing data to the wrong individual. Where schemes are unsure about a match, they must return a possible match and release a limited form of administrative but not personal data, encouraging individuals to get in touch. Should trustees or managers of occupational pension schemes not comply with the requirements in these regulations, the Pensions Regulator can take robust action through compliance notices, third-party compliance notices and penalty notices.
Baroness Drake (Lab)
My Lords, I declare my interest as a trustee of an early staging large master trust and a sizeable DB scheme, as detailed in the register. I thank the Minister for her very helpful presentation of these complex regulations. I acknowledge the work that has been undertaken to get this programme to this point.
A pensions dashboard is a great concept for the public good; the challenge is delivering it in a way that enables savers to access their pensions data securely so that it meets their needs and improves their outcome. Let us be clear: the information on the pension benefits and amassed assets of millions of citizens, covering trillions of pounds of value, will be made accessible through this dashboard. It is important that the Government get it right. These regulations form an important part of that assurance.
A consistent concern in this House has been the issue of identity verification to ensure that citizens are protected against fraudsters, scammers and others unauthorised to access their data. There are two key points for identity verification: that required for the citizen to access the pension finder service to search for and request information, and that required by schemes to identify whether they have a match to a request and whether to release the data to be viewed.
On the first, the pensions dashboard programme has procured an interim identity service provider while awaiting progress on the Government’s “One Login” solution as a ubiquitous way to sign into any GOV.UK service. On the second, these regulations leave to the trustee the data criteria for identifying a match and releasing value data. However, given the need to minimise the risk to the individual saver and the cybersecurity risk to the dashboard ecosystem as a whole, is it the Government’s intention that the “One Login” solution must be available for use before the Secretary of State announces the date of the dashboards available point, when the service is made available to the public?
The Minister referred to standards. The DWP has published draft standards outlining mandatory requirements for providers on how they must operationally and technically meet their legal duties, and the pensions dashboard programme has consulted on its approach to governance of standards in the future. However, those standards are outside the regulation to allow for flexibility and further development. While that may make sense, given the public interest in data on trillions of pounds of value being accessible through the dashboard, how will Parliament be kept up to date and receive the necessary assurance that the governance of the dashboard ecosystem continues to be fit for purpose?
Design standards matter too. I leave my actuarial noble friend Lord Davies to go into detail on this. Design standards are about presenting information in the way that will best help users to understand it. They are an important element in consumer protection. Inevitably, consultation to date has largely been with the industry, although user testing is undertaken during development and staging. Is it the intention to permanently embed user testing into future reviews and developments of those design standards, and how will that be done?
Compliance with dashboard requirements is being phased in from August 2023. Reflecting on what the Minister has said, it may be earlier. It will start with large DC schemes used for auto-enrolment. Trustees must connect by their staging deadline, with all in-scope schemes having to connect by 31 October 2025, as detailed in Schedule 2. As has been said, the Secretary of State will give six months’ notice before dashboards go live to the public, an increase on the original 90 days proposed. This is a sensible move, given the importance of getting this programme right, notwithstanding the previous Minister’s lack of sympathy for the delay— I think that the right decision has been made.
Regulation 4 states that, before specifying the dashboard available point,
“the Secretary of State must be satisfied that the dashboards ecosystem is ready to support widespread use of qualifying … dashboard services by the general public”.
I take that to mean that enough schemes are on board, the data is good enough and there is no prospect of crashing. What is the minimum extent of progress in implementing the DWP and FCA staging profiles that has to be achieved before a dashboard available point is announced, or is it necessary for the staging profiles to be completed in full before public access can commence?
Schemes will need to be data-ready for the dashboard to minimise the risk of data breaches or not returning a match. These regulations require schemes to provide detailed information to the regulators on find and view requests, the matching process, the number of possible matches, the number of positive matches and much more before the dashboard is publicly available, and subsequently after it is. What confidence level in respect of minimising false positives and false negatives in response to find and view requests must be met before the public announcement about the availability of the dashboard is made? What happens if all public service pension schemes are not ready to stage by September 2024, given the considerable relevance of these schemes to supporting widespread use of the dashboard?
Increasingly, DB schemes are transferring their assets and liabilities to an insurer under buyout. Do such buyouts pose complexity for the operation of the dashboard service, including from any differences in the FCA and the MaPS/TPR rules?
A key policy objective for the dashboard service is to connect individuals with an escalating number of small pots in the hope that people will transfer and consolidate them. The Government have not taken determined action on this problem to date and are clearly hoping that the dashboard will provide the solution. However, evidence shows that information access does not always overcome inertia, so is the dashboard now the Government’s primary policy for addressing the small pots problem? Will the DWP set hard targets for the reduction in small pots in its critical success factors?
Expected benefits to the consumer include the value of increased engagement, increased savings actions and more informed savings decisions, but these have not been monetised because the data is not available to do that. Given the lack of knowledge and understanding that often prevails, the complexity, the barriers of inertia, present bias and the unknown behavioural responses of providers and savers, it will be important to understand what actually is happening so as to understand the extent of the public outcomes or any emerging detriment from the operation of the dashboard. What plans do the DWP have for a programme of research and monitoring of behaviours?
Finally, on the FCA, there are four regulators in the dashboard space, so it is quite crowded. It raises issues of coherence, from the straightforward, such as minimising duplication of information demands on schemes, to the more complex potential for regulatory omission or confusion, as in the case of the steelworkers. These regulations do not cover FCA-regulated personal and stakeholder pensions. The duty placed on the FCA, to quote its policy statement,
“requires that we have regard to the requirements that the Government’s regulations place on the trustees of occupational schemes”—
so there is clearly scope for some differences. There will be closed books, legacy products, and funds where data quality will be poor and charges high. There could be differences in how pension values and costs and charge data are provided. For example, as I saw from the FCA’s own site, some FCA-regulated providers do not have information on costs and charges on certain plans available online. These schemes will be allowed just to explain where the consumer can find the details—but that is hardly a digital experience compliant with the standards that appear to be being set by MaPS.
Lord Vaux of Harrowden (CB)
My Lords, as I said all those years ago when we were discussing what is now the Pension Schemes Act, I also greatly support the concept of the introduction of pension dashboards. I am probably one of the people the Minister referred to who has that dusty box under the stairs, so I welcome this SI in principle. I have a few questions that I would be grateful if she could answer. Unfortunately, I was unable to attend the briefing that she kindly arranged, so I apologise if some of these questions were dealt with then, but there is probably no harm in the answers being on the record.
First, like the noble Baroness, Lady Drake, I agree that the six-month notice period makes sense. I hear what the Minister said about progress in creating the dashboards, but she has not said when she expects the public to be able to access them. The year is probably broad enough, but it would be interesting to understand when we think these dashboards, or at least the first dashboard, will be available.
The SI enables the establishment of dashboards additional to the MaPS dashboard. Things have obviously moved on a bit since we were discussing the then Pension Schemes Bill, so could the Minister give us some idea of how much genuine interest there has in fact been in creating other dashboards? Is she aware of any being worked on at the moment? There is not very much in this SI to incentivise the creation of private dashboards, nor anything that sets out who would be allowed to do so or how they might generate revenue. I understand that that will be covered by the FCA consultation she referred to. Under this SI, all they will have to do is meet the dashboard requirements.
We had many discussions in previous debates around the use of dashboards for selling advertising, transacting, et cetera. The SI is silent on those matters. I would be interested to know whether the Government’s thinking has evolved since our previous discussions. Perhaps the Minister can let us know. She mentioned in her opening speech the dashboard not allowing transactions, but I think that relates only to the MaPS dashboard. I am not sure whether she intended that to mean private dashboards; perhaps she might clarify that. For example, is there anything that would prevent a large pension provider or a consolidator creating a dashboard and then using it to encourage users to transfer, perhaps from a smaller provider, to its products or services? Does the Minister agree that there might be a conflict of interest, or even a competition issue, in that sort of situation?
That leads on to the use of the data by the dashboard provider. I was not clear from the SI what was allowed in that respect. Regulation 9 seems relevant, but I am not sure I fully understood it. As an example, could a dashboard provider—perhaps a big tech company such as Google or Meta—create a dashboard and use the data it holds or acquires to target advertising for competing products? If that is or will be possible, that would worry me. It would be a really serious fraud risk. We need safeguards over who is allowed to create dashboards and the way that revenue will be generated from them. The SI is silent on that.
I also have some questions on the impact assessment. Some surprisingly big numbers are there, with a wide range of outcomes. The best-estimate case comes out at a convenient figure of £30 million positive, just about breaking even. Am I being slightly cynical to think that has been slightly massaged or managed? The net present values for the first 10 years range from a worst case of £1.016 billion negative to a best case of £1.220 billion positive. Frankly, all that says to me is that there is still a very high level of uncertainty about the actual costs and benefits of the dashboards. It is also true that the bulk of the cost will fall on the industry and the benefits, which are less tangible, will go to members. To what extent is it expected that these costs, which are somewhere in the region of £700 million to £1.6 billion if the impact assessment is to be believed, will be passed on to pension funds? What impact will that have on pensioners? In particular, one has to assume that the cost will be higher as a percentage of funds for smaller funds, as the level of bureaucracy is similar with a smaller amount of money to spread it across, so what impact is expected, particularly on smaller funds and their beneficiaries? Is any support anticipated by the Government?
Related to the impact assessment, despite the expected annual cost being approximately £100 million a year, which is 20 times the statutory guidance level of £5 million, the Government have decided not to include a review clause in this SI. Instead, they have opted for what they call a multi-strand monitoring and evaluation strategy, which is subject only to ministerial review and approval. That is regrettable, and I am not even sure what a multi-strand monitoring and evaluation strategy actually is. Can the Minister put on record what form she expects that multi-strand monitoring and evaluation strategy to take, when and how often it will happen, and what will be reported publicly or to Parliament?
The Secondary Legislation Scrutiny Committee’s report makes it clear that
“the system has not been fully worked out yet and will remain under development for some time.”
Can the Minister give us some insight about what further developments are still to come, what further SIs she expects to bring to us and when, and whether they might cover some of the matters that I have mentioned?
Lord Davies of Brixton (Lab)
My Lords, I am happy to take part in this debate. I need publicly to declare an interest as a fellow of the Institute of Actuaries, albeit non-practising. A dashboard is a very good thing, and we want to see it introduced. In truth, my perfect pension system would be one in which you never have to think about it until you retire, and we could dispense with dashboards, but we are not in that space, we have to have a dashboard, and this is the dashboard we have.
As I say, I welcome it. I was involved 25 years ago in discussions about an early progenitor of what we have. At that time it was just too difficult, but with the development of digital capabilities, it has now become a practical reality, and I look forward to it becoming a useful tool for people as they plan for their retirement. Noble Lords can probably tell from my tone of voice that I am heading towards a “but”, but I want to do that emphasising my gratitude for all the work that has been done by the department, the officials and the Pensions Dashboards Programme, as we call it now, although I rather wish they had not adopted the word “ecosystem”.
The regulations before us have to be judged in terms of what the objectives are. What are we having a dashboard for? The starting point was to connect people with their pensions. There was a lack of connection and the figures we have had of the orphan pots are truly staggering and concerning, so any step towards avoiding that problem is to be welcomed. Obviously, people want to know what they have got in those pots. That is straightforward and should be done.
Then we move on to a further stage, of people’s likely income in retirement. This is where things start to get sticky, because the point of telling people that likely income in retirement is as a “prompt for necessary action”—which I think are the words used on the PDP website. The Minister, whom I should have thanked for her detailed and helpful introduction, used the term “informed decisions”—so that people can take decisions commensurate with their retirement aims. I think the model people have in mind is that you look at your pension statement, you think that it is not enough, so you start saving more money. In that sense, it is inevitably and inherently a sales tool. That is one of the problems we face in setting up a dashboard that works in people’s interests.
A point that I have made consistently in discussions about a dashboard is that it has to have the state pension there, but an equally valid—in my view, more important—conclusion that you can draw from your pension statement, if you think your pension is not good enough, is “Well, I’ve got to start campaigning for a better state pension”.
I am going to look in particular, on the basis of that, at what Schedule 3 calls the “value data”. The regulations lead via the 2013 regulations to AS TM1 from the FRC. That is Actuarial Standard Technical Memorandum 1 from the Financial Reporting Council. A new version of that will come into effect from 1 October next year. I picked that up at the very useful meeting that we had with Ministers, but the first DAP for the larger schemes is supposed to be from 31 August 2023, or it could be earlier, which is before we have the new technical memorandum. The whole point of achieving this technical memorandum—it is spelled out in the work that has been undertaken—is that the previous version was not good enough for the dashboard statements. We had to have the new technical memorandum because the old one simply did not work. People could do it on all sorts of bases. You would have a consolidated statement with several figures which could all be calculated on a different basis and were not comparable. So we came up with this new technical memorandum which requires schemes to do it on a standardised basis.
I think it is important when you do that to understand what you are really getting. Is this really an estimate of people’s likely retirement income? I think we need to hesitate before encouraging people to place too much confidence in that understanding of what these figures will be. They will be figures calculated on the basis of a single, predefined set of assumptions. The technical memorandum is well within the bounds of plausibility. It is not necessarily the technical memorandum I would have come up with if I had had to decide, but I cannot point to it and say it is nonsense or misleading. However, it is important to understand that it is only one among a range of possible views of the future, and we are misleading people if we give them any idea that this is what is going to happen. I think it is fair to say that the figure you are presented with is probably the least likely figure of all possible outcomes.
Just as an aside, it is also important that this will be a government-endorsed figure. Make no mistake: the ordinary person seeing this on their pension statement, knowing that this dashboard has been legislated for by the Government, will see an implicit government guarantee for that figure. There is no way of avoiding that. That is what will happen. Government Ministers can say for all they are worth, “No, we are just facilitating this; it is not our figure”. If, over time, these figures turn out to be woefully positive, the Government will be held to account. A similar disaster happened with endowment mortgages, and we saw what happened there. People believe the figures they are given, are gravely disappointed when they do not appear and look for reimbursement.
Baroness Bowles of Berkhamsted (LD)
My Lords, I was not expecting to have to do the dashboards but, as the Minister will know, I intervened during the passage of the Pension Schemes Act. I was there for the money and finance bits and discovered that I had a bit of a love/hate relationship with the dashboard. At first sight I love the idea, but then—as has been relatively eloquently explained, and I will not delve further—there are all kinds of problems, ranging from operational ones to the ones that interested me most. I think I am in exactly the same space here as the noble Lord, Lord Vaux, as usual. What happens if it becomes a platform for advertising?
A good starting point is to look at paragraph 14 on page 9 of the impact assessment, which is about the rationale for the intervention and the pensions dashboard. It quite clearly mentions
“potential benefits/efficiency gains to pension providers if consumers are encouraged to keep track of their pensions, save more, potentially consolidate pots, and shop around for decumulation products”,
but those are benefits to the providers, as it says there. We need to be very clear: we want to make sure that the benefits to the providers do not leave out benefits to those with pensions.
Talking about consolidation, I understand that if there are a lot of really small pots, there is probably something to be said for sweeping those together. But having been self-employed for my entire working life, when I set up my own pension schemes I wanted a bit of diversity. I had several because I did not like the notion that one of the funds might go bust and I would be in trouble—if I had loaded it all into Equitable Life or something. Much to my disappointment, they all got consolidated into Aviva through the consolidation of the industry. Actually, that is not quite true; I still have some others. I carefully selected a completely different batch for my husband, but they also ended up all in Aviva.
Some diversity is a very good thing, because you get performance differences. You might want to phase how you take your retirement and it might prove to be more flexible. So the notion that you should force everybody to have one pot is bad news, to my mind, because you are cutting out diversity and the opportunity that that brings.
Like the noble Lord, Lord Vaux, I latch on to the comments made by the Minister about commercial exploitation. That is a very important point. These pensions dashboards will not be cheap to make. If you do one, with all the wonderful data there, you will be very tempted to exploit it in some way; yet we do not have the information in front of us because that kind of thing comes presumably through the FCA route. I apologise that my information is not as full as it should be, as I too was unable to go to the meeting that was arranged. As there are several regulators involved and several parts of this puzzle to be brought together, it would be nice to have that bigger overview instead of having it in bite-sized chunks where you cannot fully see how they inter-fit.
Most of my other points have already been raised by others and I will not go back to them. However, I was slightly curious about delegated access. Again, it was indicated that, essentially, a financial adviser could have the delegated access. When I speak to a financial adviser, I do not necessarily want them to know what I have got everywhere. Again, as I have several different pots, I can get advice about one pot and not another. Assuming that everybody should have the full view is perhaps not the way to go. I do not know whether it would be possible, but it would be good if you could somehow choose which part is visible to somebody and which is not. I would like to have seen that, but it might be rather difficult.
I also wonder what the provisions will be for others, such as family members who may become involved in trying to help some of their older people sort out their pensions. Some people want that, some do not. They will not be regulated. Will they have to have some kind of formal or legally signed document to be able to take that position? Obviously, they can be sitting at your shoulder when you access, but there will be people who are incapacitated. How will their dashboard be accessed and what will be the safeguards?
I think just about everything else has been mentioned. I will just say that I agree with a lot of the questions. In general, I accept that we need this statutory instrument because it paves the way for everything else to come, but it would have been quite nice to see more of the parallel tracks coming to the same discussion. We will have a statutory instrument or something from the FCA, which will be separate from this. It would have been nice to have them as a package, perhaps debated together, so that we could cross-compare for whether there are gaps, how the different responsibilities will be bridged and how the information will be shared. All these things are yet to come.
Lord Jones (Lab)
My Lords, I thank the noble Baroness for her introduction—a heroic introduction in the circumstances—and for the department’s lengthy Explanatory Memorandum. The department is clearly trying to help and has put in a lot of hard work to try to throw more light on a complicated subject. My noble friend Lady Sherlock is always up to the mark on complexity, and there is plenty of complexity in these regulations. The pensions paper is 41 pages long, which is not a criticism by any means. Surely these dashboards are positive, helpful and welcome.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for her comprehensive introduction to these regulations, and all noble Lords who have spoken. Most of us were involved in the passage of the Pension Schemes Bill, so it is nice to have the band back together again even if—it has to be said—we are a bit of a band of anoraks. I am also grateful to the Minister for the briefing that she arranged for us, and for her willingness to engage. It was helpful to be able to hear from Ministers—and, indeed, officials—about the work that has been done on the scheme, and really good to hear about the progress that has been made. We have supported the idea of a public dashboard and it is great to see that coming to life.
That said, I have a lot of questions to ask. I apologise to the House in advance, but this is the only chance that we will have to ask questions on a very complex, billion-pound project. Once we come out of here today, there is no automatic place where we will get to do it again, as the noble Lord, Lord Vaux, pointed out. So I hope that the Minister, and the House, will bear with me. I have tried to give notice of my questions to the Minister as many are quite technical.
First, we need clarity on timing, as mentioned by the noble Lord, Lord Vaux, but also on what schemes will be covered. Schemes with under 100 active or deferred members are outside the scope of these regulations. Can the Minister tell the House how many pension pots fall into that category, and can we expect all other pension pots to be included in due course? Schedule 2 shows when the different schemes will be brought on to the system. Can the Minister tell the House when data from personal and stakeholder pension schemes will be available to the public through the dashboard, and what is the position with group personal pension plans?
At the dashboards available point, or DAP, when the public can access dashboards, we expect to see some 99% of pension pots covered by the dashboards. Is that correct? How many pots does that leave out, and how many people will be in that position? Since some pots will not be displayed, how will I know as a consumer that I am not seeing all of my pensions? How will that be flagged up to me so that I can make an appropriate judgment?
My noble friend Lord Davies had some important questions about how the value of different pots will be displayed. I will be interested to hear the response to those. I also want to talk about handling data, on which the noble Lord, Lord Vaux, raised some important questions. But first, how confident is the Minister about the data quality? Has the work done so far thrown up any concerns?
My noble friends Lord Davies and Lady Drake raised some important questions about identity verification. It will be interesting to hear the answers to those but, once you have the identity, the next step is matching the consumer to the pension pot. That, essentially, is the central activity on which the whole system hangs, yet the Government have decided not to set a common data standard which has to be met to trigger the release of pensions data. Instead, firms are to be told to set their own data standards to trigger release; so, once a find request is received, a scheme will have to complete matching to identify whether they hold information on an individual’s pension matching that in the request. But rather than requiring trustees to use particular data criteria for determining matching, DWP expects schemes to take “reasonable, diligent steps” and to minimise the risk of data breaches or not returning any matches.
Regulation 28 requires information on the matching process used by schemes to be given to MaPS, TPR and the FCA. The idea is that the relevant regulator can, if they so decide, require a scheme to change its matching data requirements if it does not think them appropriate. There will be guidance from the Secretary of State, and the FCA will be seeking consistency of approach to identity matching for release of view data by its regulated providers, while the ICO will be issuing its own statement on matching data breaches. The DWP consultation points out that the whole thing rests on consent:
“The nature of an individual’s consent must be clear, explicit, understood, and informed. It cannot merely be … a tick box condition of usage”
That will be articulated more closely by the pensions dashboard programme in another publication. Given all that, why did the DWP not set particular minimum data standards for schemes for matching and releasing data to a view request, especially given the number of schemes involved? Can the Minister explain for the record what would happen if data submitted by a consumer are a partial match for data held by a firm? That is something I have had offline.
Can the Minister also tell me whether a member’s view data can be screen-scraped and stored by a third party? I am very exercised by this. I think the regulations say that a firm cannot store the data except during a session, but let us think through what this means in practice. Suppose a consumer is viewing her data on a firm’s dashboard, with an adviser from that firm sitting next to her. Can the firm screen-scrape the data from its own dashboard, retain it and immediately conduct a transaction off-dashboard, which might be a matter of pressing a button and jumping from one screen to another? If the answer is, “Only if the consumer consents”, how will the Government ensure that consent is meaningful, given the quotation I gave earlier from the DWP?
Sometimes the answer to this tends to be, “Don’t worry, because the FCA will have regulatory oversight of the firms and, where appropriate, the advisers”. This is where my noble friend Lord Jones comes in, because that was of course the case when British Steel’s pension scheme got into trouble and had to be restructured. Has the Minister read the report published in July by the Public Accounts Committee? It found that the FCA failed to protect British Steel pension scheme members from “unscrupulous financial advisers” who were incentivised by existing fee structures and regulation “to provide unsuitable advice” that led to around 7,800 steelworkers losing an average of £82,600 in life savings—I stress, an average of that—with some losing up to £489,000. The committee said:
“The FCA has consistently been behind the curve in responding to unsuitable pension transfer advice.”
The Minister cannot simply say that it is a matter for the FCA. If her Government choose to legislate to mandate the creation of commercial dashboards, on which we have expressed concern, and the release of data belonging to millions of consumers knowing that the Public Accounts Committee has said that the FCA is consistently behind the curve on protecting those consumers from unsuitable advice, then it is the Government who will bear responsibility for the consequences if people suffer losses. What assurance can the Minister give the House that the PAC will not be publishing another report in three or five years’ time on the fallout from commercial dashboards?
That takes us to the liability question. I am still not entirely clear about end-to-end liability in the system. Where does liability lie if a consumer makes a decision on the basis of view data which later prove inaccurate? If liability is with a trust-based scheme, ultimately that means the trustees. Is the Minister concerned that if some significant liability were established, many trustees simply would not have the personal wealth needed to fund any redress, and where would that leave consumers? Does this pose a risk that anyone other than corporate trustees will be deterred from serving as a trustee on a pensions board?
Next, where can consumers go to make a complaint? I understand that there is to be a single front door, but where does it lead and what is behind it? Which bodies will handle requests for redress from consumers who lose money as a result of making decisions which turned out to be based on wrong data? Can they go to the Pensions Ombudsman, the Financial Ombudsman Service or somewhere else?
Hackers and scammers were raised by my noble friend Lord Davies. I assume the plan is to warn consumers to be aware of scammers, but is there a strategy in place to counter the risks of scams within the system, as opposed to at the individual consumer’s end? Has it been designed to make it hard for scammers to operate and is there a plan to counter the risk of hacking or are we, as my noble friend said, going to see pensions view data being traded on the dark web, as we do credit card details? Are there back-up systems? If somebody were to lose a payslip, so that somebody picking it up simply had a name, address and national insurance number, could that be enough to hack their pensions data?
We have highlighted a range of concerns and some potentially serious risks of the project, but clearly there will be benefits too. I take the point made by the noble Baroness, Lady Bowles, about the importance of who benefits, not just that there should be benefits; we need the consumers too. Like the noble Lord, Lord Vaux, I read the impact assessment and I had a lot of fun with it. I know that it is a very anoraky thing to say but, my goodness, what a great document. Basically, it sets out low, central and high estimates for costs and benefits. In present value, the central estimate says that the project will cost £1.089 billion over 10 years. That is broken down as, roughly speaking, £850 million in industry costs and £240 million in public administration costs, or £1 billion over 10 years in today’s money.
As the noble Lord, Lord Vaux, said, the central estimate of the benefits comes in incredibly conveniently at just £29.5 million over. Of course, that is plus or minus £1 billion because the high and low estimates are literally £1 billion over or under. It is not a very meaningful aggregate figure anyway because it costs industry and government £1 billion and saves consumers a very notional £1 billion. But when we look at the benefits to consumers, that £1 billion of benefit in the central estimate is split almost equally between £541 million for the value of lost pots and £578 million for something called the consumer surplus. Digging further, it turns out that consumer surplus is the notional value deriving from consumers getting for free a service for which they would have been willing to pay. How do we know they would have been willing to pay? Researchers were sent out to ask them what they would pay for this service, then came up with this number. All I will say is “Hmm”, although we learned the interesting fact along the way that the number of users is expected to rise from 3 million in 2024-25 to 18.5 million in 2031-32.
We cannot incur all this risk and spend north of £1 billion for those two bits of value, particularly the consumer surplus. There must be other benefits. The Explanatory Memorandum has a really good section headed “What is being done and why?” at paragraph 7.4. It says that pensions dashboards
“will engender a greater sense of ownership of pensions, reconnect individuals with any lost pension pots, support the advice and guidance process, and enable more informed choices to be made when individuals access their pensions savings”.
The key question is: will people end up with higher pensions? The answer is “We don't know”, because the impact assessment says on page 23 that
“there is no robust evidence to attach causality and monetise the benefits in terms of increased retirement income that result from the dashboards”.
Could they end up with lower pensions? That might sound daft, but if someone sees their pension assets and decides to use them by taking some cash out—using the pension freedoms the Government gave them—to deal with their current living costs, they would end up with less to live on. Out of curiosity, is there any evidence that the process could lead to reduced retirement income? The IA did not address that.
Baroness Stedman-Scott (Con)
My Lords, I know all noble Lords across the House care passionately about the success of pensions dashboards. I remember well the quality of debate during the passage of the Pension Schemes Act 2021, which I am pleased has continued today. I thank noble Lords for their contributions today. I am glad that noble Lords found the briefing and engagement sessions helpful. I reciprocate that because I found the level and detail of our subsequent engagement absolutely invaluable. I am now going to try to make the dreams of the noble Baroness, Lady Sherlock, come true by making sure that I answer all the questions. If there are any that are unanswered, I will write and ensure that a copy is placed in the Library.
The noble Baronesses, Lady Sherlock and Lady Drake, raised the issue of small and micro-schemes. It is the Government’s intention to bring them into scope and regulate for small and micro-schemes with fewer than 100 relevant members at a later date. This will be subject to further consultation. While there are nearly 30,000 schemes in this category, they account for a tiny proportion—about 0.2%—of memberships. For the vast majority of potential dashboard users, their absence is unlikely to affect coverage.
I refer to a point made by the noble Baronesses, Lady Sherlock and Lady Drake, about DAP—the dashboards available point. In the government response to the further consultation, we set out that the coverage of schemes is one of the relevant matters we expect the Secretary of State to consider when deciding to announce the dashboards available point. While we have not specified a certain level of coverage to determine when the service will go live, we plan on closely monitoring the levels of coverage at different stages as schemes begin to connect with the dashboard architecture from April 2023. According to our staging profile, we expect that over 99% of active and deferred memberships will be available to be found on the pensions dashboard by the end of September 2024. The noble Baronesses also asked how many members will not be covered. The number of members with small and micro-entitlements that will not be covered at the dashboards available point is 179,000. This accounts for just 0.26% of all active and deferred memberships.
The noble Baroness, Lady Drake, asked if all public service pension schemes are ready to stage by September 2024, given the considerable relevance of those schemes to supporting widespread use of the dashboard. Public service pension schemes cover a significant proportion of memberships and will be required to connect and provide data as part of the first wave of staging, along with other large pension schemes. The Government recognise that the cloud remedy represents a unique challenge for public service pension schemes, including significant changes to systems and processes on top of more widely shared industry constraints. This has been taken into consideration when determining their staging deadline. In deciding the dashboards available point, the Secretary of State, in consultation with our delivery partners, will consider the level of coverage, ensuring the safety, security and reliability of the service and testing the user experience.
The noble Baroness, Lady Drake, asked if it was the intention that the Government’s “One Login” solution must be available for use before the Secretary of State announces the date of the dashboards available point when the pensions finder service is made publicly available. The identity service for pension dashboards is not dependent on the Government’s “One Login” as its solution before dashboards can be launched. The pensions dashboard programme has procured an interim identity service provider with a contract running until January 2024. The service it provides is aligned with the Government Digital Service good practice guide. Presently, the Money and Pensions Service is engaging with officials in the Cabinet Office and the Government Digital Service, as well as the wider market, building on the engagement work undertaken in 2020 to identify all possible options that may comprise its new identity service model. The key focus for the Money and Pensions Service is to ensure inclusivity for individuals while meeting a verification standard that is appropriate both to government for the state pension and to wider commercial stakeholders.
The noble Baroness, Lady Drake, asked if Parliament will be kept up to date and receive the necessary assurance that the governance of the dashboards ecosystem as a whole continues to be fit for purpose, and what plans the DWP has for a programme of research and monitoring of behaviours. The noble Baroness, Lady Sherlock, also raised this. In partnership with the pensions dashboard programme, we currently deliver six-monthly updates to Peers touching on the status of delivery of the pension dashboard digital architecture.
In addition, we are exploring options for monitoring and evaluating pensions dashboards. Given the significant investment in dashboards, monitoring and evaluation is an important part of the department’s focus. A multistrand evaluation strategy is being explored. This will be developed alongside the pensions dashboard programme, the Financial Conduct Authority and the Pensions Regulator, to ensure that learning helps to further develop dashboards over time.
If noble Lords find this helpful, options being considered include a longitudinal quantitative survey to monitor outcomes from the dashboard usage, qualitative research with consumers to explore dashboard use, qualitative research with the pensions industry, estimating changes in number and values of lost pensions pots, and monitoring information provided by dashboard providers. We will use the findings from monitoring and evaluation to develop pension dashboard policy further and ensure the policy is delivering for consumers and the pension industry.
The noble Baroness, Lady Drake, asked if it is the intention to embed user testing into further development of design standards. User research by the pensions dashboard programme and findings from its various working groups have been considered throughout the development of the pensions dashboard architecture. The Money and Pensions Service will provide a dashboard service and plans to undertake user research and testing to understand what questions people have upon seeing their data on dashboards. All future developments will be informed by user testing and undertaken in the best interests of consumers.
The noble Baroness, Lady Drake, asked if there is a confidence level in respect of minimising false positives and negatives for find and view requests which must be met before the DAP is announced. In the Government’s response to the further consultation on the dashboard available point, we set out a broad framework of relevant matters that will be considered before the Secretary of State announces the dashboards available point. This will include consideration of the level of coverage, ensuring the safety, security and reliability of the service and testing the user experience. The framework we put in place will be developed through wider engagement with interested parties and be informed by ongoing testing. This will ensure that the Secretary of State’s decision to announce the dashboards available point is based on a transparent and evidence-based process. We expect to publish our progress so that it is clear to industry when the likely date for the dashboards available point will be in advance of the formal six-month notice period.
The noble Baroness mentioned insurance buyouts and asked whether such transitions to buyout will pose complexities for the operation of the dashboard service, particularly if there are differences with the FCA and MaPS/TPR rules and regulations. The FCA rules make it clear that a deferred annuity contract—including retirement annuity contracts, Section 32 buyout policies and pension buyout contracts—is included as a personal pension product for the purposes of dashboard rules. Upon transferring to a new scheme, view data for those members will not be required for three months from the date of joining.
The noble Baroness asked whether the delivery of the pensions dashboard service is now the Government’s primary policy measure for addressing the small pots problem, and whether the DWP will set hard targets for the reduction in the number of small pots in its critical success factors set out in chart 1 of the impact assessment. Our immediate priority is to deliver pensions dashboards to help individuals to access their pension information and to plan more effectively for their retirement. The first iteration of pensions dashboards will not facilitate the automatic consolidation of deferred small pots; however, the provision of all this information in one place is an important first step in helping people to make decisions. Schemes getting their member data dashboard-ready will put the industry in a better position to implement solutions aimed at tackling the proliferation of deferred small pots. The reduction in small pots is not one of the critical success factors for dashboards, and we will not therefore set targets. However, the impact of dashboards on the number of small pots may be picked up as part of our wider monitoring and evaluation activity.
The noble Baroness asked whether I would facilitate a meeting with the FCA and the PDP. My officials, and those of MaPS and the FCA, would be delighted to engage. I will ensure that this happens.
I turn now to the points made by the noble Lord, Lord Vaux. On the Explanatory Memorandum, which refers to “Monitoring & review”, the noble Lord asked what review is intended and, especially, what will be published and when. Given the significant investments in dashboards, both monitoring and evaluation are important and, as I have already said, this will be developed alongside the Pensions Dashboards Programme, the Financial Conduct Authority and the Pensions Regulator to ensure that the learning helps to develop dashboards over time. I have already explained the options being looked at.
The noble Lord spoke about impact assessment and cost. If the industry passes its costs on to pension savers in the form of higher charges, we expect the overall annual cost per member to be low—around £2 per pension pot per year. This is a nominal amount in the context of pension wealth. Between 2018 and 2022, median pension wealth was £32,700 for individuals with a pension not yet in payment. Our research shows that the benefits to members will be greater through finding lost pension pots by using the free dashboard service. Furthermore, as dashboards develop, we will further understand user behaviours, and dashboards will have the potential to increase overall engagement with pensions in the longer term. This will have potential additional benefits to pensions providers as well as to members, although those benefits have not been quantified in the impact assessment.
The noble Lord made a point about the use of data and marketing, and asked what restrictions would be put in place on the use of data. For example, could a large pension provider or consolidator create a dashboard and then use the data obtained for marketing purposes? A similar question could be asked about a large tech company, such as Google or Meta. Other than for purposes of temporary caching, no data is stored on pensions dashboards, therefore it is not possible to mass-harvest the data of individuals via dashboard technology. The questions about whether consumers should be able to export their pension data from a dashboard, including the export of data from the dashboard to the dashboard operator, is a matter that the FCA will explore in its forthcoming consultation on the regulatory framework for pensions dashboard operators.
Baroness Drake (Lab)
I am sorry to intervene, as I know that the Minister is trying to answer all the questions, but I want to ask a question on the regulated FCA authorised advisers. The whole point is that that system of authorised advisers, which has been changed several times, even on the FCA evidence is not sufficiently protecting people. The fact that it is being offered as a solution is one of our concerns.
Baroness Stedman-Scott (Con)
I note the noble Baroness’s point. This is something that we will take back with officials and to the relevant authorities, and it is something else that I shall write about and I hope give her a better answer than she has had to date.
The noble Baroness, Lady Bowles, raised the issue of risk of exploitation of data. Pensions dashboards and the technology behind them are designed to maximise data security. For example, pensions information is sent directly and securely from the scheme to the individual; it is not stored by qualifying pensions dashboard services or by the digital architecture. Individuals will always have control over who has access to their data, and will be able to revoke access at any time.
The noble Lord, Lord Jones, and the noble Baroness, Lady Sherlock, have raised to me individually the issue of British Steel pension schemes. The FCA is responsible for the regulation of the financial advice market and has looked closely at the advice provided to those BSPS members who decided to transfer out of the defined benefit scheme. It found that a very high proportion had received unsuitable advice, as has been said. The FCA has announced that it intends to take forward a scheme to provide compensation for BSPS members who received poor advice; it published a consultation on this scheme on 31 March, which has now closed. I think that the point that the noble Lord and the noble Baroness were making was that it must not happen again, and I am sure that message is understood.
The noble Baroness, Lady Sherlock, asked me to confirm when the data from personal and stakeholder pension schemes will be available to the public through the dashboard. She also asked what the position was with group personal pension plans. As set out in FCA rules, the majority of personal and stakeholder pension schemes are required to stage as part of the first cohort by the end of August 2023. That includes group personal pension plans. Until dashboards are launched to the public, schemes’ data must be available to invited users for testing purposes.
The noble Baroness raised a point about missing pots. Only a very small proportion of occupational pension scheme memberships are out of scope of the obligations to connect in our regulation and FCA rules. We expect that, at the point when dashboards are launched to the public, most individuals can be confident that all their pensions will be available to find via dashboards. When the value data for found pensions has not yet been provided—for example, if the member is new to the scheme, or when the value is still being calculated by the scheme—information to that effect will be displayed on the dashboard.
The noble Baroness asked how confident Ministers were about the quality of the data and whether the work has so far thrown up any concerns. It is critical that savers can trust the information in front of them; trustees and managers have existing legal obligations in respect of data quality, including the accuracy principle under UK GDPR, which requires that organisations ensure that data remains accurate and up to date. The Pensions Regulator set out its expectations on data quality in its record-keeping guidance; this includes that data is measured at least once a year.
The noble Baroness asked why the DWP had not set particular minimum data standards for schemes for matching and releasing data. The regulations allow for the trustees and managers of schemes to set their own matching criteria. We believe that schemes should be given discretion over which data elements they use to suitably search their records for a match. It is important that any scheme’s matching policy is appropriate to the level of confidence that they have in their own data; a uniform approach across all schemes would be likely to result in suboptimal matching.
Just to divert the House for a moment, I am conscious of how long I have been speaking, and I am keeping others from their business, but I am absolutely committed to answering these questions. With the leave of the House, I hope that I can carry on.
The noble Baroness, Lady Sherlock, asked whether I could explain for the record what would happen if the data submitted by a consumer was a partial match with data held by a firm. Schemes have the option of returning a possible match if they believe that they hold a record for an individual but are not certain. When a scheme returns a possible match, an individual will receive a limited form of administrative data that will enable them to contact the scheme to see if the possible match is in fact a match made.
The noble Baroness asked about screen-scraping. The regulations prohibit the storing of dashboards of view data, unless for temporary caching and for the sole purpose of displaying the view data in a single session. Similarly, transactions are not possible through the dashboard ecosystem. Making it possible for consumers to find information about all their pensions in a single place and requiring the consumer to undertake an identity verification check before being able to access that information significantly reduces the consumer appeal or perceived benefit of agreeing to screen-scraping. I have much more that I could say on that issue, so I shall write and place a copy of the letter in the Library of the House.
The noble Baroness, Lady Sherlock, and the noble Lord, Lord Davies, raised the point about complaints and where the liability lies if a customer makes a decision on the basis of view data that later proves to be inaccurate. As set out in our response to the consultation on the draft regulations, trustees or managers are responsible for meeting the requirements, which include receiving fine data, as well as undertaking, matching and returning the correct view data. Trustees or managers are not responsible for verifying the identity of users, and the authorisation of view requests or any processing of view data carried out by dashboards. The question of liability in the event that something goes wrong to the detriment of the individual would have to be considered on a case-by-case basis.
The noble Baroness, Lady Sherlock, raised the issue of liability and risk for trustees. The Government acknowledge that many trustees do an excellent job, often on a voluntary basis. The vast majority of trustees are in schemes with fewer than 99 members, so will be outside the scope of these regulations, unless they connected to pensions dashboards voluntarily. Although we accept that the regulatory requirements on trustees have grown a great deal over the years, this is only right, given what is at stake—we are talking about pension savings for millions of people.
The noble Baroness, Lady Sherlock, raised the issue of handling complaints and where consumers go to make a complaint. The dashboard ecosystem is made up of multiple different parts and, as such, dashboard users would potentially have complaints against a number of different parties. MaPS will therefore provide a central queries and complaints navigation tool, which qualifying pension dashboard services must direct individuals to, to help them understand their issues and know to whom they should direct their query or complaint if things go wrong, and the available routes to redress.
The noble Baroness, Lady Sherlock, raised the issue of scams and hackers and asked whether there is a strategy in place to counter the risk of scams within the system and whether this is being revisited regularly. It is crucial that dashboards give power to consumers and not scammers, which is why the dashboard ecosystem has been designed to ensure that only relevant pension schemes and authorised qualifying pension dashboard services have access. To maximise the effectiveness of the Money and Pensions Service pensions dashboard, users will have access to a retirement planning hub, which will provide onward planning journeys in a single place, supporting good decision-making. The FCA and MaPS will keep their rules and standards under review as dashboards emerge and evolve.
Baroness Sherlock (Lab)
If I can put the Minister out of her misery, I would be content from this point onward if she were to write to me with answers to the remaining questions. I just say for the record that I flagged up to the usual channels some time ago that this instrument would take rather longer than the normal time, and it would have been helpful if the planning for this evening had taken that into account. However, I am very grateful to her for having answered so fully and to have taken the time to do this—I really appreciate it.
Baroness Stedman-Scott (Con)
I appreciate that intervention and I undertake to write on the four remaining points, and perhaps offer a meeting to wash up and identify those things I have not dealt with as well as I might have.
My final point, noble Lords will be pleased to hear, is that pension dashboards will reunite individuals with their lost or forgotten pots and engage potentially millions of savers. It is important that we press ahead with this ambitious project, so that savers can realise the benefits. I therefore commend these regulations to the House.