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 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.