My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
My Lords, Amendment 38 in my name endeavours to fulfil the objectives of the pensions dashboard by ensuring people have access to all their pension entitlements. At the moment, they will be able to access entitlements under schemes only in their own name; they will not be able to access information about entitlements they may have because their husband, wife or partner has named them as a beneficiary under another scheme. More and more couples are both at work, and most pension schemes enable a beneficiary to provide for a surviving spouse. My amendment would enable a named beneficiary to access a dashboard where they had an interest. Without that information, that beneficiary will not know whether they have made adequate provision for their old age, which is a primary objective of the dashboard.
There may be other ways of achieving this objective. When a policy is taken out, beneficiaries could be sent a copy; I do not think this happens at the moment. They could be sent an annual statement, as the main policyholder is, or the main policyholder could be given the option of ticking a box so that beneficiaries can access the relevant dashboard with their consent. The point made in the amendment is a simple one: if the dashboard is to give people a complete picture so they can make informed judgments, they need to have access to this relevant information.
Amendment 43, supported by my noble friend Lord Flight, and Amendment 44 have a similar objective in enabling someone to see whether they have made enough provision for their old age by including relevant assets that can provide a pension income on the dashboard. The helpful policy brief says on page 45:
“Putting individuals in control of their data, dashboards should support engagement in pensions and planning for retirement.”
Planning for retirement involves more than pensions. Each Sunday, the Money section of the Sunday Times has a “Fame and Fortune” feature, in which there is a standard question:
Lord Flight (Con)
My Lords, I support Amendments 43 and 44 in the name of the noble Lord, Lord Young. He made the point that equity release is a growing source of income for people later in life. I would say it more strongly than that: I can imagine it being the biggest source of income for such people in 20 years’ time. I understand that the financial advisers who advise otherwise on pension fund matters are not qualified to advise generally on equity release. That has been substantially cleaned up, as it were, over the past 10 years so it is not a problem, but if the dashboard cannot include equity release, it does not meet its objective of setting out what people have to live on in older age. We do not want to delay wider progress but if equity release is not included quite speedily in the dashboard, it will not do its job.
My Lords, the purpose of Amendment 39 is to contain the delegated powers in the Bill so that they do not provide the power to authorise commercial dashboards to engage in transactional activities. Any authorisation regime to permit transactions should be addressed in a future Bill.
In a previous contribution, I sought to set out the policy still to be settled when the dashboard is focused on enabling individuals to view their pensions information in one place. When functionality is extended to the ability to transact on a commercial dashboard, the challenges and potential risks are even greater; there are multiple ways in which detriment to savers can occur. We should again remind ourselves that the dashboard project can extend to the whole of the UK pension system—public and private—embracing many millions of people. Allowing transactions over dashboards needs separate and clear consideration. It cannot be implicitly tucked into the delegated powers in this Bill.
Issues of private and public good will be impacted by whether the dashboard is fit for purpose when it comes to transactions: private good at the individual level and public good at the whole pension system level. I have yet to see the behavioural outcomes strategy associated with the dashboard. I assume the Government are not agnostic on the matter, given that the state supports the long-term saving system with some £45 billion of tax relief, so they will have a direct interest in knowing that the outcomes are good.
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The delegated powers in this Bill are pretty open-ended, but Parliament needs to be satisfied that as the dashboard transitions, adding more functionality, the controls and supports are in place for good consumer outcomes to be achieved, and that the aggregate outcome of the decisions made by individuals as a result of the dashboard service makes a positive contribution to retirement outcomes for the public good in the UK. The evolution of the dashboard beyond the initial mandatory find, release and view of information should come back to the Houses of Parliament for proper scrutiny.
The long-term saving market is particularly susceptible to consumer detriment, and the evidence and informed opinion, including all relevant regulators, is that the consumer demand side is weak and increasingly focus has to be on provider supply-side controls to protect consumer interests. I shall illustrate the spirit of that comment. Commercial dashboards would make it much easier for firms who have attractive front-end offerings to capture consumer assets through encouraging easy consolidation of pension pots via mobile apps, but sometimes the business models of those firms mean charges on those assets will be considerably higher.
The Bill may set a framework for deciding what information should be on a dashboard, but the presentation of that information is hugely important. For example, some dashboard providers could have an incentive to present information on certain pension schemes more favourably, either because the dashboard provider is also a pension provider or because their business model is based on helping some pension schemes to attract customers. Value-for-money assessments are as variable as the criteria against which assessments are made, and the weightings given to each criterion making comparisons are extremely difficult. As a trustee, I am directly involved in trying to deliver value-for-money assessments under our regulatory obligations, so I feel confident in making that assertion.
Dashboards are not a silver bullet for removing the risk of consumer detriment. The evidence demonstrates that most individuals will not proactively engage with their pensions until they have to. When they do, they can be price insensitive and vulnerable to judgments detrimental to retirement incomes. Noble Lords do not need to take it from me. There is a heavy weight of evidence from regulators such as the FCA which supports that. In fact, it is evidence that the FCA contributed to with its report on the drawdown market.
The regulation of consumers granting delegated access through the dashboard will need careful consideration, because any exposure through a weak delegated access system could be much greater when all the information is available at one point. It is important because the current body of evidence reveals that consumer behavioural biases have more impact on financial capability than lack of knowledge and information. They take what the FCA describes as the path of least resistance, even in the face of information available to them.
The provision of dashboards may be a regulated activity, and therefore the FCA’s FiSMA powers come into play. However, there is the issue of whether the FCA will require additional powers to impose supply-side controls in order to protect consumer interests, particularly given that we do not yet know what government policy will be on many issues, including the pricing model for commercial providers, which the noble Lord, Lord Young, referred to.
The FCA conduct rules have not prevented repeated failures or scandals. The failure of support to the Port Talbot steelworkers is just a recent example on the continuum stretching from the personal pension mis-selling scandal of the late 1980s. Any brief reading of the FCA reports on the functioning of the financial advice market to support pension savers does not leave one with a high level of confidence.
However, clarity on the model of liability, including that carried by the state which is mandating the release of data, will be essential if transactions are allowed over the dashboard. The FCA will not be the only regulator with an interest. Protecting the data and its holding, access and use in a transactional model of dashboards will be of major importance, given the scale of harm to consumers that could occur if it is not done properly. Parliament should have the opportunity to scrutinise to satisfy itself about what is being proposed.
The dashboard, properly implemented, can empower and inform individuals and contribute to them making better decisions. However, the long-term savings sector as a whole is not that far up the digitalisation curve, the good examples excepted, and it should harness the positives of financial technology to the benefit of customers. But the scale of the project and the consolidation of an individual’s data in one space can also enhance the scale and consequences of consumer detriment if the risks are not properly addressed and a high level of confidence provided.
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“What’s better for retirement—property or pension?”
Yesterday, the Olympic medallist Sharron Davies said “Property.” The question makes the point that, for many people, there is a choice of how to provide for retirement. This amendment is a permissive one, which would enable a pension provider with a dashboard to include information on the equity locked up in someone’s home.
For millions of people, the equity in their home is worth more than their pension pot. Increasingly, that equity can be and is unlocked to provide an income stream in retirement. According to the ONS, we have £14.6 trillion in wealth—perhaps a little less following the slump on the stock exchanges last week—within which private pension wealth makes up 42% of national wealth, while net property wealth is not far behind at 35%. Arguably, equity release should play a higher role in proactive financial planning. Potentially, it is a valuable source of supplementary retirement income, particularly for pensioners on low incomes in homes that they own.
Many pension providers also provide equity release: for example, Aviva, Liverpool Victoria, Scottish Widows and Legal & General. It would make sense for them to be able to include illustrations about equity release alongside the pensions dashboard. Equity release is regulated by the FCA and can be sold only through a financial adviser. It is now one of the most highly regulated financial service products in the UK. In many ways, the decision whether, when and how to access equity release is not unlike the decision to access a pension pot. Independent advice is necessary, taking all considerations into account. I repeat what I said at Second Reading: I do not want to do anything to slow down the introduction of the dashboard, but I want to ensure that, when it is up and running, it can be used by those providing it to give customers a comprehensive view of assets and options, rather than a partial one.
I turn finally to Amendment 45, which deals with the verification process before one is allowed to access the dashboard. This is the weakest link in the chain. The ABI website—incidentally, it still proclaims that the Government’s objective
“is for the service to be available to consumers by 2019”—
says this about verification:
“The process to confirm the identity of users is based on the gov.uk/verify system which has already proved to be a secure portal for people accessing personal information.”
That could be an understatement. So secure is the portal that, as I will come on to in a moment, 56% of those who try to verify that they are who they are fail to do so and hence would be unable to use the dashboard.
There are risks in building the dashboard on the shaky foundations of Verify—one of the Government’s least successful IT initiatives—from which it is hastily disengaging, leaving its future in doubt. The NAO described Verify in March last year as
“intended to be a flagship digital programme to provide identity verification services for the whole of government ... In its 2016 business case, GDS identified the following key targets and expectations for the platform: 25 million people would use Verify by 2020, and 46 government services would be accessible through Verify by March 2018.”
As of 13 February, 22 government services use Verify—fewer than half the number expected by March 2018—and only 5.8 million people have signed up. There is a verification success rate of 44%, against an initial target of 90%. I failed twice to verify who I was.
In July 2018, the Infrastructure and Projects Authority recommended that Verify be closed as quickly as practicable. In a recent report, the NAO concluded:
“Even in the context of GDS’s redefined objectives for the programme, it is difficult to conclude that successive decisions to continue with Verify have been sufficiently justified.”
The Institute for Government’s Whitehall Monitor recently commented that the scheme continued to be “mired in issues”, had fallen short of targets and had
“failed to build its intended user base and it is not delivering the efficiencies that the government sought.”
In October 2018, the Cabinet Office announced that the Government would stop funding the scheme in March 2020. Against the background of the unpromising progress of the scheme, the then Minister for Implementation stated, in words that could have been crafted by the scriptwriter of “Yes Minister”, that it was
“now sufficiently mature to move to the next phase of its development.”—[Official Report, Commons, 9/10/18; col. 3WS.]
The intention is that the private sector will take over responsibility for the scheme, despite the NAO finding that the Government have failed to make the scheme self-funding and the Government failing to convince their own departments to use the scheme. What will the private sector do with the scheme? With no government support, the providers of the service may have to increase the charges to government departments, which the NAO warns may make it unaffordable for them to use. Of the 22 that use it, half have alternative means of accessing the services provided.
This is what the whole dashboard depends on. Will the private sector continue with it? If so, will it be free for consumers, as at the moment? What happens if there is no Verify process? On charges, the policy brief says on page 51:
“Government is clear that accessing basic information via pensions dashboards must be free at the point of use for consumers.”
I ask this in passing: where in the Bill is that commitment legislated for, and what is the point of making it free to access the dashboard if the verification process has a charge? I appreciate that my noble friend the Minister is dependent on the Cabinet Office for support on this issue, as that is where responsibility for Verify rests, but she has an obligation to satisfy the pension industry and pensioners that the system proposed in the Bill is fit for purpose.
Finally, at the moment, many pension providers have websites that customers can access and where they can get information about their individual pension pot. They can not only access that information but top up their pot, withdraw sums and switch investments. But under the Government’s proposals, if that pension provider then provides a dashboard, existing customers will not be able to access it using their usual log-on procedure; they will have to go down the Verify route first. Perhaps the Minister can confirm that that is indeed the case.
So, we have the odd situation where a purely passive site such as the dashboard, which can provide only information and is not interactive—Amendment 39 secures that—has a different and higher standard of security than the pension provider’s site, which is interactive. I do not understand why a pension provider that has satisfied itself about the bona fides of a customer to the extent that it will respond and pay drawdown cannot allow access to a dashboard on its site, which is purely passive, without obliging the customer to go through a cumbersome verification process. Perhaps that could be looked at as well. I beg to move.