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 and stakeholder pension schemes and will be consulting on a regulatory framework for qualifying pensions dashboard services later this year.
5:30 pm
The regulator will be delivering extensive communications to ensure that trustees and managers are aware of their new duties. It has provided guidance and is writing to all schemes at least 12 months ahead of their staging deadline. The regulator will have the discretion to exercise its powers, and we expect it to pragmatically consider the circumstances of a breach when deciding to take action.
This is an innovative programme, and its success will rest on the confidence that users have in it. This means that users should be able to trust the dashboard service provided by MaPS and other qualifying pensions dashboard services, which must adhere to the duties set out in these regulations and accompanying standards and guidance. In addition, His Majesty’s Treasury is working to introduce a new dashboard-specific regulated activity via an amendment to the regulated activities order, which is expected to be laid before Parliament in early 2023. This will have the effect of bringing dashboard operators within the FCA’s regulatory remit. Only those organisations which are authorised by the FCA and are granted permission to undertake the new regulated activity will be able to connect to the infrastructure. The FCA will consult on a regulatory framework later this year.
The new regulated activity will allow authorised pensions dashboard operators to involve third parties to bring pensions dashboard services to market. For example, some pensions dashboard operators may wish to enter commercial arrangements to make their dashboard services accessible to third parties, customers, members or employees to extend the reach of dashboards to even more users. The regulated activity will provide for clear and transparent regulatory responsibility focused on the operation of dashboards.
The clear and consistent presentation of data is crucial in instilling trust and guarding against poor decision-making. We aim to strike the correct balance between innovation and consistency. Qualifying pensions dashboard services must present the same basic pensions information, accompanied by appropriate descriptions, caveats and warnings. However, they may present this information in a way that best suits the users of the service within the boundaries of the regulations and MaPS standards. This could mean presenting the information graphically, for example, which might help some members better understand and engage with their pensions.
We also understand the importance of the onward journey in helping people make decisions. Signposting and other information to support individuals to understand the information displayed are among the issues being considered by MaPS and the FCA when developing the design standard and rules for qualifying pension dashboard services. The MaPS dashboard will sit within the MoneyHelper retirement planning hub, which will also contain a wealth of information and guidance.
The oversight framework for qualifying pensions dashboards includes: these regulations, and the supporting standards published by MaPS; the requirement for a regular audit by an independent person; and the FCA’s regulatory remit. I believe that the combined strength of these protections will guard against consumer harm, ensuring that dashboards are a tool for consumer empowerment.
Lastly, it would be remiss of me not to update the House on the delivery of this programme. I am pleased to say that the pensions dashboard programme has delivered the digital architecture underpinning this project and is currently testing and refining the service in readiness for schemes to be connecting from April 2023. Early participants will begin connecting in the new year. We are grateful for their co-operation, helping to prepare the ground and setting an example for others to follow. The department will also connect state pension data this year as part of an upcoming testing phase.
I am satisfied that the Pensions Dashboard Regulations 2022 are compatible with the European Convention on Human Rights. Subject to the view of this House, the approval of the draft Pensions Dashboard Regulations 2022, laid before the House on 17 October, puts us one step closer to delivery for consumers. I beg to move.
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?
5:45 pm
Finally, the FCA will be responsible for authorising commercial dashboards, which may offer delegated access to an individual’s pensions data to MaPS guiders, advisers with particular FCA permissions or others considered appropriate by MaPS. We do not know who these others might be, nor the conditions that will apply to delegated access, although there is a degree of framework in these regulations. The case for MaPS guiders is clear: they have no commercial interest in a saver’s position; they are just giving guidance. However, there is a public interest in the wrap of consumer protection around how those delegations operate and in the related matter of who can hold an individual’s view data. Sadly, FCA authorisation has not always protected consumers in the pensions space, and under the dashboard all the saver’s assets will be on view, so the criticality of that protection is even more important.
The Minister has been extremely helpful in facilitating meetings between the DWP, the dashboard programme and interested Members of this House. Would it be possible for her to facilitate a meeting with the FCA and the dashboard programme so that we can raise our concerns?
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?
20 of 63 shown
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.
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.
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?