Pensions Dashboards (Amendment) Regulations 2023
(Limited Text - Ministerial Extracts only)
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Viscount Younger of Leckie
That the Grand Committee do consider the Pensions Dashboards (Amendment) Regulations 2023.
Relevant document: 44th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument).
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)
My Lords, I am pleased to introduce this statutory instrument, which, subject to approval, will make amendments to the Pensions Dashboards Regulations 2022. The instrument removes the staging profile from the 2022 regulations and introduces a single connection deadline of 31 October 2026 for relevant occupational pension schemes to connect to pensions dashboards.
The successful introduction of automatic enrolment more than a decade ago, combined with a trend towards people working multiple jobs in their lifetime, has seen a substantial increase in smaller pension pots. Without intervention, the number of lost and forgotten pots will remain exactly that—lost and forgotten—and financial planning for retirement will become still more complex. Pensions dashboards will help hard-working savers to locate pension pots that they have accumulated over time, reconnecting them with lost and forgotten pension pots and supporting better planning for retirement. People will be able to view their various pensions, including their state pension, securely and all in one place online.
There can be no doubt that pensions dashboards have the potential to become a game-changer that will revolutionise the pensions landscape. The UK is not alone in realising the enormous potential that pensions dashboards bring. Countries such as Denmark, Israel and Australia have all established pensions dashboards as a feature of their financial landscape. However, the UK’s pensions industry is arguably unique by virtue of its scale and complexity. We should not underestimate the ambition and challenge of securely connecting thousands of schemes and of presenting data in a coherent manner, from state and private pensions, for the benefit of savers. We anticipate that, once all schemes in scope of the regulations are connected, the pension records of over 71 million memberships from relevant occupational pension schemes and providers of FCA-regulated entities will be accessible to people at the touch of a button, at a time of their choosing.
The reason for bringing forward these amendment regulations is that, at the end of last year, the Pensions Dashboards Programme, which is responsible for delivering the digital architecture that underpins pensions dashboards, informed my department that more time was required to complete the build of the digital architecture. The PDP faced several key issues: the technical solution has not been sufficiently tested and there is still work to do to finalise the necessary supporting documentation and to get the necessary systems in place to support the pensions industry with the connection process. It was concluded that more time was needed to successfully deliver dashboards and that a reset of the programme was required.
The Minister for Pensions subsequently issued a Written Statement in March 2023, announcing the delay and setting out that the Pensions Dashboards Programme would be reset to get it back on to a path for successful delivery. The decision to pause, review and reset the programme will provide it with the time to ensure complete delivery of the ecosystem and supporting documentation before industry begins to connect. So far, the reset has assessed the digital architecture and I am pleased to report that no fundamental issues have been identified. This has provided reassurance to the Government to move forward with amending the regulations.
The staging profile in Schedule 2 to the 2022 regulations set out the order in which different types of schemes, categorised by size and type, would connect to pensions dashboards. However, the 2022 regulations did not provide the flexibility necessary to deliver a programme of this magnitude—a digital undertaking that will enable users to search over 3,000 schemes to find their pensions.
This instrument curtails the period of uncertainty for the pensions industry. The staging profile in the 2022 regulations required the first schemes to connect at the end of August 2023. By laying these amendment regulations, we are seeking to avoid any perception that schemes would be in breach through no fault of their own. As mentioned, all schemes in scope will now be required to connect to dashboards by 31 October 2026 at the latest. The regulations will provide more flexibility to deliver pensions dashboards while retaining the broad framework of a phased approach to help to manage the flow of connections and maximise coverage as early as possible.
The Government will work with partners and the pensions industry on a connection timetable to be published in guidance. We expect that the connection timetable in guidance will prioritise large schemes with the greatest number of members. This will maximise the potential for savers to realise the benefits of dashboards as early as possible. The dashboards available point—the point at which dashboards will be available for widespread public use—could therefore happen before the October 2026 connection deadline in the regulations. Although the connection timetable set out in guidance will not be mandatory, there is a requirement for scheme trustees or managers to have regard to this guidance. Not doing so would be a breach of the regulations. The Financial Conduct Authority will ask its board to make corresponding deadline changes in the dashboard rules for FCA-regulated pension providers shortly after Parliament approves these amending regulations.
I will now explain what has not changed. Although the instrument amends the requirements on trustees or managers by removing Schedule 2, there are no other material changes to the regulations. All other requirements have been retained, including the requirements to be satisfied for qualifying pensions dashboard services, connection duties and requirements on “find” and “view”. Crucially, the requirement for the Secretary of State to provide six months’ notice ahead of the dashboards available point remains unchanged. The Government will continue to work with the industry on the matters that must be considered before dashboards are launched to the public.
The consumer is at the heart of all our endeavours. These relevant matters are important to ensure that pensions dashboards are launched to the public safely and securely, having been rigorously tested. Protecting the best interests of savers is the core principle behind dashboards and the Government remain firmly committed to ensuring that people’s data is accurate, simple to understand and, above all, secure. Dashboards will ensure that people always remain in control over who has access to their data, as existing legislation, including data protection duties, underpins the requirements that must be adhered to by pension providers, schemes and qualifying pensions dashboard services.
Accurate and high-quality data is essential to delivery and the success of pensions dashboards rests on the pensions industry’s ability to successfully match consumers to their information. The Government and the regulators have repeatedly advised the industry to get its data ready for dashboards. It should use the extra time to ensure that it can meet its dashboard obligations. Schemes and providers are already subject to existing statutory and other protections on data, including the accuracy principle under UK GDPR, which places a requirement on schemes to take all reasonable steps to erase or rectify inaccurate data without delay. It is crucial that dashboards give power to savers and not to scammers. Robust controls and standards will be built into the digital architecture to prevent potential scammers or fraudsters from gaining access to people’s information.
These amendment regulations will facilitate a collaborative approach to connection that delivers on our commitment to introduce pensions dashboards. Pensions dashboards have the potential to transform retirement planning for ever and these regulations are another step in the right direction. I therefore commend them to the Committee. I beg to move.
Lord Young of Cookham (Con)
I am most grateful to my noble friend for the clear exposition of this statutory instrument and for the very helpful meetings that he and his officials have held with noble Lords over the past few months. I am also grateful to him for the letter that he wrote to me following the last meeting.
Looking around, I see some aficionados from our earlier debates on the pensions dashboard. I was looking at a debate from 28 January 2020, when I said:
“Over the weekend, I logged on to the Pensions Dashboard Prototype Project, which I found informative, but right at the end it said: ‘The industry and government hope to have Pensions Dashboard services ready by 2019’”.
At that time, we were debating a consultation document and the response to it. Again, I quote:
“Reading the response to the consultation document, we are told: ‘Once the supporting infrastructure and consumer protections are in place, and data standards and security are assured, most pension schemes should be ready to provide consumer’s information to them within three to four years’”.—[Official Report, 28/1/20; col. 1373.]
That was in January 2020. My noble friend knows that this project has been dogged by uncertainty and delay.
I have a specific point to raise about the identification service. Consumers will obviously have to identify themselves before they can access the dashboard. The Government’s initial proposal was to use Verify, a system sponsored by the Government with ambitious targets to have 46 government services accessible by March 2018. Sadly, that project was not a success. The NAO said that
“it is difficult to conclude that successive decisions to continue with Verify have been sufficiently justified”,
and the Government withdrew support from Verify in 2020. The pensions dashboard has had to develop its own service in the meantime.
In my noble friend’s very helpful letter, he referred to the new government service, GOV.UK One Login. He said:
“The core of the system has been launched: its sign-in element, a web-based identity verification journey, and a fast-track identity checking app”
are up and running. I have actually connected to and logged into One Login, and am now registered.
In his letter to me, my noble friend went on to say:
“As you may recall, the PDP”—
pensions dashboard programme—
“has procured an interim identity service provider, whose contract runs until January 2024”.
At what point will the pensions dashboard transfer from this interim service? Will it transfer to the government-run One Login, which seems the obvious thing to do, assuming that it is as robust? By the time the system is launched in 2026 or earlier, will the interim service have been put to one side and will we all have moved over to One Login; or will the interim service still be the one that we have to use, for the next few years? I hope to hear that it will have transferred to One Login, so that we do not have to register twice—first with the interim one and then with One Login. That is my main point.
My final point is on the Secondary Legislation Scrutiny’s Committee report on this statutory instrument, published on 22 June, which I am sure my noble friend has seen. The committee raised two points in its conclusion, to which I am sure my noble friend will reply. In paragraph 27, it quoted its 16th report:
“We encourage the Government to take this opportunity to address the complexity and costs of the dashboard … by simplifying and standardising the system wherever possible”.
The committee confirmed that that remains its position in its latest report on this instrument. Finally, it said:
“We are disappointed to, once again, find our Report supplying basic information to the House that DWP should have published in the EM”—
the Explanatory Memorandum. I am sure my noble friend will respond to those points, in addition to my main point about the verification service.
Viscount Younger of Leckie (Con)
My Lords, I thank the Committee for its broad approval for these regulations. I start by making the point that it was helpful to hear from the noble Baroness, Lady Drake, who is highly respected in this House for her pensions expertise. She welcomed the regulations and pointed out that, back in 2019, in her view, these regulations were far from being ready—she is of course correct in saying that. I value her broad support this afternoon. However, I acknowledge that there are a huge number of questions to answer in this debate, for which I thank noble Lords.
Throughout their development, pensions dashboards have received cross-party support in both Houses. Your Lordships will no doubt share my disappointment that we have needed to amend the original timeline. It is vital that the foundation upon which the dashboards ecosystem is built is safe and secure, as I said in my opening remarks. However, I am certain that the Government have made the right decision in slowing things down for the benefit of consumers.
I thank my noble friend Lord Young. I am grateful to him for reminding us of past deadlines—and indeed of past deadlines missed. I reassure him and the Committee that we are getting back on track. I hope that, in answering a lot of the questions raised today, I provide reassurance on that.
My noble friend raised the revised Explanatory Memorandum. During scrutiny of the regulations, the Secondary Legislation Scrutiny Committee felt that the EM could have provided more detail on the impact of the amendment regulations. Officials in my department subsequently provided a written response to the committee, and the department has replaced the EM with a revised version that provides the further detail requested by the committee. The DWP recognises the value of parliamentary scrutiny and the requirement for comprehensive explanatory material. It has begun internal action to strengthen its assurance processes.
I will answer the question raised by my noble friend Lord Young on the One Login, probably towards the end of my speech. I very much take note of what he asked.
I turn now to the broader issues regarding the dashboards and the reset. This was raised by the noble Lord, Lord Vaux, and the noble Baroness, Lady Sherlock, but it is a general theme. For example, he asked whether we had made the reset too complex. He also asked how much the scope has changed. As I said in my opening remarks, dashboards are complex, but the design is right. It is based on security and information, and on an understanding, from user research, about the information that users expect. The scope has remained the same throughout.
The noble Lord, Lord Vaux, went further, in asking questions about why the delay came about. I am probably repeating myself, but it is a project of significant undertaking, requiring the development of new technology that will permit individuals to find their pensions by searching thousands of pension schemes, which collectively hold millions of pension records. It became clear that the PDP would require additional time to deliver the complex technical solution to enable the connection of pension providers and schemes. I believe that my department took swift action to address the issues as soon as we knew that they had arisen. As I said earlier, the delay is frustrating, but it is vital that the foundation on which the dashboard’s ecosystem is built is safe and secure.
The noble Lord, Lord Vaux, also asked about the cost to the taxpayer. The dashboard project is funded by the financial services levy and the general pensions levy. These levies pay for the Pensions Dashboard Programme and the MoneyHelper dashboard, including staffing costs. The PDP has a spending review allocation through to 2025-26, and allocations beyond this point have not yet been determined. As the regulatory impact assessment shows, there is an increase in direct costs to industry of £69 million. I hope that provides some help.
The noble Baroness, Lady Drake, raised the so-called Mansion House package. I will give an overarching response on that. Since her appointment, the Minister for Pensions has focused on reforms to the private pension system, which have centred on introducing greater fairness, adequacy and predictability for today’s auto-enrolled generation of savers. The DWP has been working closely with the Treasury on a package of measures set out by the Chancellor in his speech the day before yesterday, as the noble Baroness knows, all designed to drive better outcomes for pension savers.
These are all part of a wider government agenda to improve the opportunity for investment in alternative assets, including high-growth businesses, and to improve saver outcomes. We believe that a higher allocation to high-growth businesses as part of a balanced portfolio can increase overall returns for pension savers, leading to better outcomes in retirement. We want to ensure that our high-growth businesses of tomorrow can access the capital that they need to start up, scale up and list in the UK. I am happy to write to the noble Baroness with further information. She asked about the value for money framework, so I will write to her about that.
My noble friend Lady Altmann asked about enforcement actions for schemes and whether or not they adhere to the guidance. The timeline in guidance will not be mandatory. However, trustees and managers must have regard to the guidance on connection. Trustees and managers will be expected to demonstrate how they have had regard to the guidance, and a failure to do so will be a breach of the regulations and therefore could result in enforcement action. All trustees and managers must connect by the deadline set out in legislation. I reassure my noble friend that failing to do so could result in action by the regulator, as I suspect she probably knows.
Then the question of liability arises. If an individual makes a poor decision based on inaccurate information, what then happens? Making pensions dashboards work involves multiple parties, so the question of liability if something goes wrong needs to be considered, but on a case-by-case basis. Pension schemes, qualifying pensions dashboard services and MaPS will all be subject to complaints management by the relevant ombudsman. This means that if the party at fault does not deal with the user complaint satisfactorily, the relevant ombudsman may investigate complaints and make determinations to put things right.
My noble friend Lady Altmann asked about standardisation of data, which is an important question. The Pensions Dashboard Programme is seeking to standardise many aspects of data. The regulations set out clear requirements relating to connection and the value and other data. MaPS will publish standards relating to data. The Financial Reporting Council had updated its requirements regarding the calculation of values to improve the consistency of projections.
The noble Lord, Lord Palmer, asked about digital access. His specific question was about those who do not use it, which is a fair point. It is true to say that, moving forward, this is primarily a digital solution we are providing, but there are existing resources still available, including the provision of annual statements. I hope that gives him some reassurance about those who are not quite as digital as others.
The noble Baroness, Lady Sherlock, asked about transparency on progress. I remind her and the Committee that the PDP publishes a six-monthly report. Additionally, it holds a briefing sessions with interested Peers—which I pledge to do on a regular basis—and we are keen to give as much information as we can. I hope that, from past form, she will be reassured on that.
A number of questions were raised by not only my noble friend Lady Altmann but the noble Baroness, Lady Sherlock, and I will attempt to whisk through them in the time available. The noble Baroness asked whether, with a single compulsory connection deadline, there is a risk of a backlog of schemes trying to connect as the deadline—31 October 2026—approaches. That is a fair question, and other Peers raised the same point. The regulations include a requirement to have regard to guidance issued on connection. We will be engaging with industry on guidance that will set out the proposed connection timetable. There have been positive signs among leading providers of their intent to adhere to the guidance, which is helpful. Similarly, the ABI published a statement indicating that its members would look to connect as per the guidance. The Pensions Regulator may take action where the trustees or scheme managers fail to have regard to the connection guidance and is assessing whether any changes need to be made to its compliance and enforcement policy.
The noble Baroness also asked what action the department would take if there was evidence of back-ending and backlogs building up. The DWP will work with the Pensions Dashboard Programme and regulators to monitor connection activity, and will use insight from industry to inform how we can best help to maximise adherence and remove potential barriers for schemes. Our expectation is that, given the widespread support for dashboards, the schemes will adhere to the connection profile in guidance. However, to provide more reassurance, we will keep this approach under review and will consider changes, including further legislation—note that—if problems emerge.
The noble Baroness, Lady Sherlock, asked several questions in relation to our intention to publish a revised connection timeline in guidance. She asked—as did my noble friend Lady Altmann—when the guidance on proposed connection dates will be published. We will work with industry this year on agreeing the connection timetable to be published. We intend to publish it as soon as possible.
The noble Baroness, Lady Sherlock, asked what role the regulator would play in encouraging schemes to follow the guidance, given that trustees and managers must have regard to it. She and the noble Lord, Lord Palmer, also asked about clarity on encouragement to compliance. The regulator will write to all schemes, informing them of their proposed connection date, as set out in guidance, and the action that they need to take to connect by the set date. The regulator will expect trustees to be able to demonstrate how they have had regard to the guidance. As I mentioned earlier, failure would result in enforcement action.
Lord Young of Cookham (Con)
My noble friend has been very helpful. Is it the Government’s objective that the Government’s One Login will be the access point to the pensions dashboard?
Viscount Younger of Leckie (Con)
The answer is yes, eventually, but I will need to write to my noble friend to qualify what I mean by that. That is the aim and it makes sense, but I cannot say that it will be by a particular date. I shall write to my noble friend.
I shall conclude quickly because I realise that others are waiting for the next debate. I thank all noble Lords in the Committee for the points that they have made. I commend the regulations to the Committee.