Pensions Dashboards (Amendment) Regulations 2023

Lord Vaux of Harrowden Excerpts

Wednesday 12th July 2023 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, it is obviously deeply regrettable that the pensions dashboard has been delayed—again, I should probably say. If it is not ready, a delay to the connection is obviously necessary, so there is not an awful lot to be said about the regulations themselves. As we have just heard, the Explanatory Memorandum is less than fulsome on the reasons or the implications, as the Secondary Legislation Scrutiny Committee pointed out in its rather critical report, so I want to ask a few questions. I have not been able to attend some of the briefing sessions that the Minister has organised, so I apologise if I am covering what was said at some of those, but it might be worth having it on the record anyway.

What is the reason for the delay? The Explanatory Memorandum and the Minister talked about insufficient testing,

“more work … to set up adequate support for industry … and … to finalise … supporting guidance and standards”.

However, those are not reasons; they are not what has caused the delay. Delays of this nature are typically caused by inadequate scoping at the outset—we got it wrong at the beginning—by changes to the scope along the way, or by some combination of the two. Which is it? Who is responsible? What action has been taken to make those responsible for the delays accountable? If the team needs to be strengthened, has that happened?

The other possibility is simply that the dashboard was overcomplicated from the outset, which I think was what the Secondary Legislation Scrutiny Committee may have been alluding to. Are we sure that we are not gold-plating it? Are we reinventing the wheel here? For example, have we taken advantage of the experience of open banking? We could have piggybacked on that.

Is a third-party supplier involved? If so, who and what responsibility does it have for the delay? Are there penalty clauses in the contract? If a third-party supplier is not involved, is it sensible for us to try to do a project of this size entirely in-house?

The EM is very quiet on the cost implications. What was the forecast development cost? I am talking about not the overall costs of the dashboard over 10 years but the development cost. What is it now? How much has it cost to date? How much is still to be spent? Who will cover any increase—industry, government, taxpayer? How will that work?

When large software projects of this nature go wrong, they tend to keep going wrong. I come from a software world, so I have experience here. What comfort can the Minister provide that this really will be the final delay and that we are now properly on top of the project?

At the time of the Act that enabled the dashboard, we had a lot of debate about the creation of other, privately created dashboards, and there was a lot of agreement around the Room at the time that the Money and Pensions Service dashboard should be the first to be run. I agreed with that but, given the delays, perhaps we want to think about it again. What other dashboards is the Minister aware of being developed? Are any at a sufficient stage of development that it might be quicker or cheaper for the Money and Pensions Service to consider partnering with them?

Finally, can the Minister provide any forecast of when the dashboard will become available to the public?

[Baroness Drake (Lab)]

I thank the Minister for so clearly setting out the purpose of the regulations. I enjoyed the reference of the noble Lord, Lord Young, to his previous contribution in the debate on this issue, which was well made. My position is that it is not disappointing that the Government’s enthusiasm for such an early launch has been tempered; I always considered that it would be a very complex project and I am delighted that there is now a much greater focus on the complexities and ensuring what is delivered. I never really wanted it delivered two years ago because I did not think that it would be well delivered then. It needs to be well delivered, because of the scale that it covers.

These regulations replace the pension schemes staging profile, staging deadlines and connection window with a single common deadline for connection of 31 October 2026. I want to reflect on the guidance to schemes on a new connection staging timetable.

The DWP’s description of the purpose of that guidance has varied according to which document is read—there is not an absolute consistency. The documentation ranges between encouraging schemes to meet the new timetable to threats of a breach of the regulations if they do not, and “having regard to” the guidance is a concept that is a little unclear. Can the Minister clarify what exactly is the status of that guidance and when a breach—and a breach of what in regulation terms—would be triggered?

I will move on to an issue that we probably have not debated a great deal in previous discussions of the dashboard. The Explanatory Memorandum refers to the monitoring and review of this legislation, saying that the approach to be adopted is

“to put in place a multi-strand evaluation strategy, the details of which are being explored”.

This strategy will

“ensure the critical success factors can be successfully tested with learning helping to further develop dashboards over time”.

The plans include research into dashboard usage, outcomes from that usage and information provided by providers. However, I cannot see any reference to key pensions public policy outcomes in those critical success factors. I did not see them when the previous regulations came with the Explanatory Memorandum and I cannot see them now.

To take it at its most basic, if, for example, as a result of dashboard usage, greater numbers of people took out more of their pension savings in their 50s or early 60s, is that a success because they have engaged, or undesirable because more people will have a lower income when they get to state retirement age? We have to be very clear what are the public policy aspirations we are seeking from that greater usage. Clearly, it is not set out, as far as I can see, in the critical success factors and the multistranded evaluation strategy—although I recognise that that is work in progress. Will any of those critical success factors identified in the Explanatory Memorandum be benchmarked against desired public policy outcomes over the long term?

Staying with that concept, what long term do we want as the outcome—not only from dashboards but a whole range of other things, although dashboards are before us today? Yesterday we saw eight papers on pensions, including analysis, consultations and consultation responses, all published in one go. I cannot let that moment pass without asking the simple question of the Minister: was any consideration given to how those eight papers and sets of proposals would impact on the multistrand evaluation strategy for the dashboard? I appreciate that the Minister may not be able to answer that today but it is an important question that needs answering.

For me, the decision by the department and the FCA to proceed with a gross investment performance metric in the proposed VFM framework, as announced yesterday, rather than net of all costs and charges, together with the continued dithering by the FCA over the transparency of costs and charges value reporting in decumulation products, is a backward step which does not resonate with the pension savers’ interest and informed decision-making. That was a deeply disappointing element of that VFM framework to read. We know from the FCA’s own findings that a wide range of charges are applied in the decumulation market, which should be rigorously assessed in a joint FCA/DWP/VFM framework. That has just been sidestepped.

Yesterday, the Chancellor referred positively to the Australian supers, but I point out that they have a tough regulatory requirement to report investment returns net of fees. If the Government are going to promote private market investment, where charges are higher, transparency of returns net of fees is essential if the saver is not to end up paying back the excess returns to the industry. The link to the evaluation strategy and the dashboard is: what information will be provided, what influences on behaviour are we expecting and how will that produce better outcomes? I must admit that, when I read that VFM framework, I thought it disappointing and rather contradicted the idea that members using the dashboard will make more informed decisions. I did not want the moment to pass without making that point.