As the March 2017 deadline approaches for the implementation of a Pensions Dashboard prototype, we consider the purpose of the Dashboard and its features, the key legal issues that will arise, and the timeline to full implementation
Background
The concept of a Pensions Dashboard was introduced in the 2016 Budget, as part of the Government's strategy to encourage the public to engage with retirement planning and follows earlier initiatives, such as auto-enrolment into workplace pension schemes and the 2015 reforms enabling pensioners more flexibility in drawing down from their pensions pots.
The Dashboard will allow individuals to view all of their pension products through an online portal, as the Government, together with industry, recognised that the public is increasingly engaging with financial services through the internet and other digital platforms.1 It is hoped that the dashboard will facilitate better accessibility and management of personal financial information and financial products.
The project follows the results of research from the Department of Work and Pensions (DWP) which found that, on average, individuals will work for eleven employers during their working life, which means that upon retirement individuals often have several pensions, some of which cannot be easily located. The intention is that the dashboard will provide a link to "lost" pension pots with previous employers and could help release the £400 million worth of pension savings that the DWP estimates remain unclaimed.
The Treasury (as the Government department responsible for supporting the project) is aiming for the Dashboard to be made available to the public by 2019 and, in advance of this, has targeted March 2017 as the launch date for a prototype capable of proving that the concept is workable.2
The Association of British Insurers (ABI) is tasked with leading the development of the Dashboard, along with industry stakeholders, including insurance companies3, regulators and trade bodies (the "Project Group").
Development
The Project Group has been asked to work with insurance companies to: (i) agree the design of the infrastructure for data sharing; (ii) build and demonstrate a basic working prototype using anonymised customer data; and (iii) propose potential solutions for the development of an industry-wide dashboard.4
In December last year, six fintech firms were selected to join the Project Group to develop the technology behind the Dashboard5. The development has been split into the following categories:
- Dashboard user interface (how people will interact with the Dashboard);
- Pensions finder services (how the system retrieves information on people's different pension pots);
- Identity providers (verification of people's identity);
- Integration service providers (providing the networks and support some pension firms will need to share data with the Dashboard); and
- Matching / data quality analysis (overcoming the challenges of locating everyone's pension(s) such that they appear in the Dashboard).6
The Project Group has been asked to consider how the platform will be made available to the public, including the following options:
- Single destination model: A single dashboard user interface, accessible through one source (for example a consumer guidance brand or a not-for-profit website).
- White-labelled model: As above, a single dashboard user interface, but white-labelled and accessible through the websites of several financial services providers (such as banks, pension providers, financial advisers and fintech start-ups).
- Federated model:This approach would consist of many different types of dashboard user interfaces, so that each provider could independently develop the look and feel and the user journey to suit its own customers.
Customer research carried out by the Project Group has indicated that the single destination model is favoured by consumers (because of the trust placed in one reputable provider, and the simplicity this provides), and the Project Group has recommended that this model is taken forwards through the initial stages of development, but it remains to be seen whether this model prevails over the others and is ultimately taken forward as a live product.
Key legal issues
Legislation
While the project has been supported from the outset by major insurers, there is a concern that without legislation some insurers, including smaller insurance companies and those providing defined benefit schemes (which, ostensibly, have less to gain by participating), will not provide the necessary data such that individuals can access all their pension scheme information in one place.
If the project fails to win wide enough support across the industry, the Government may consider legislating such that participation is made mandatory7 – and this is a move which seems to be welcomed by those insurers already supporting the project.8 This approach is similar to that taken in respect of open banking, in which the Government and the Competition and Markets Authority (CMA) had encouraged retail banks to work towards standardising both customer data sets and accessibility but which ultimately saw the CMA introduce a final order requiring the co-operation of retail banks, in February 2017.9
Regulatory oversight
The potential role of regulators in oversight of the Dashboard will, to some extent, be determined by the Dashboard model which is adopted. It is possible that insurers adopting the white-labelled or federated models will find that the activities they perform in relation to the Dashboard (such as inputting data and (potentially) promoting insurance products as part of the Dashboard offering) will be covered under existing oversight by the Pensions Regulator (TPR) and the Financial Conduct Authority (FCA).
It remains to be seen whether an independent third-party operator (such as a not-for-profit or a consumer guidance brand) operating a single destination model would need to be regulated and to what extent it is subject to regulatory oversight. If such activities were subject to burdensome regulation, the costs associated with compliance may deter not-for-profits from supporting the single destination model.
Data sharing
The regulatory bodies have duties and enforcement powers around use of data, communication with customers and acting in the best interests of customers, and are likely to have decisions to make on the data which flows into the Dashboard.
If legislation is required to ensure pension providers submit data to the Dashboard, regulators, such as the FCA and the TPR, may need to monitor providers to ensure that they are complying.
The integrity of the personal data in the Dashboard will be subject to data protection legislation (including the more onerous requirements of the General Data Protection Regulation from May 2018). The insurers submitting data and the provider of the Dashboard (in the event that it is a third-party which is not a financial services provider) will need to work together to ensure that individuals' data is accurate, kept up to date, and retained for as long as is necessary to meet the needs of those individuals. It is unclear how the insurers, the Dashboard provider, and other stakeholders, will contract with each other and how the risks associated with data breaches will be apportioned between them. This is likely to emerge as a key risk issue as participants scope and quantify their liability in relation to supporting the Dashboard.
Financial regulation
The issue of whether the provision of the Dashboard would be a regulated activity is – at this stage - of less concern to authorised firms as the Dashboard may fall within the scope of their existing regulated activities.
However, there remains the possibility that the provision of the Dashboard is found by the FCA to constitute a new type of regulated activity, which would mean that regulated firms would need to obtain additional authorisation for the new regulated activity.
Additionally, if the provision of the/a Dashboard is found to fall into existing or constitute new regulated activities, third party providers under the single destination model would find themselves within the scope of FCA oversight and would need to undergo the costly and time consuming process of becoming authorised. As referred to further above, this regulatory burden could prevent not-for-profit organisations from participating.
In any event, any organisation considering supporting the Dashboard (through any of the three models set out in section further above) should consult with regulators early so that it can ensure it has the necessary authorisations in place in advance of the launch of the Dashboard.
Next steps
In its Pensions Dashboard white paper, published last year, the ABI stated its intention to oversee the production of an end-to-end prototype before the end of Q1 in 2017. At the time of writing, the prototype has not been announced and, until such prototype emerges, concerns will remain whether the project can be delivered on time, as a customer-facing product, in 2019.
As the development of the Dashboard continues behind the scenes, stakeholders should ensure they are prepared for its introduction and, in particular, consider the ways in which they are likely to contribute customer financial data to the Dashboard and the likely regulatory and data protection risks associated with participation.
Footnotes
2 https://www.gov.uk/government/news/pensions-dashboard-prototype-to-be-ready-by-spring-2017
3 The sixteen insurance companies participating in the project in November 2016 are Abbey Life, Aon, Aviva, Fidelity International, HSBC, Legal & General, Lloyds Banking Group (Scottish Widows), LV=, NEST, Now: Pensions, People's Pension, Phoenix, Prudential, Royal London, Standard Life, Willis Towers Watson and Zurich.
5 The six fintech firms are Aquila Heywood, Experian, ITM, Origo, Runpath and Safran.
9 https://www.gov.uk/government/news/open-banking-revolution-moves-closer
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