When the Government published its response to the consultation on the Pensions Dashboard, it claimed that in the first phase, schemes would “at maximum” be asked for “the information already available on annual statements, or on request”. Schemes may have assumed that this meant they would be doing little more than a ‘cut and paste’ of existing data from statements onto the dashboard.
However, the Pensions Dashboard Programme group is currently consulting on data standards for the dashboard (a consultation which closes next week) in which it says that the public will expect a dashboard to show the ‘expected retirement income’ from each pension which they hold.
The problem is that there is currently huge variation among both DB schemes and DC schemes in the data which they supply to members in statements, and many deferred DB members do not get regular statements at all.
For example, a DB scheme might give a pension figure based on service to date or assuming continued active service up to retirement. Also, DB members often have different slices or ‘tranches’ of entitlement and some statements will list these separately whilst others will lump them together in a single figure.
On the DC side, trust-based DC schemes provide projections based on rules set by the DWP (‘statutory money purchase illustrations’) whilst contract-based DC pensions are projected on rules set by the FCA (with ‘low/middle/high’ growth assumptions).
The fundamental problem is that information currently supplied on statements is provided on a range of different assumptions and presented in different ways. There are only two options for the government:
a) Data from schemes is simply cut and paste onto the dashboard but then is completely inconsistent on the dashboard; this would mean that the figures for two DB pensions for the same member could be side-by-side but calculated on totally different definitions;
OR
b) Schemes are required to supply data to the dashboard on new and standardised definitions.
Assuming that data has to be standardised before it is sent to the dashboard, this would be a huge data task for schemes, especially in the DB world. Even the best administered schemes will still have to deal with ‘non-standard’ cases (eg people with pension sharing on divorce, people with transfers in, people working past pension age etc) which may require manual calculations to present their entitlement on a new definition. But schemes where data is less well organised to begin with may face huge costs in presenting values on a new basis for all active and deferred members.
The Pensions Dashboard Programme is expected to publish its further thoughts on data standards later in the year, whilst the DWP is expected to publish regulations on dashboards in the new year once the Pension Schemes Bill has completed its passage through Parliament.
Commenting, Steve Webb said: “The pensions dashboard is a very important initiative, but the government needs to come clean about what is involved. If it really intends the dashboard simply to be a cut-and-paste from existing statements, then the information on display will be utterly inconsistent between different pensions. Assuming that this is not what is planned, schemes will instead have to do a huge amount of data manipulation to get data in a standardised format for the dashboard. The cost of this will be huge, especially where data is not currently well organised. The government needs to be much clearer about which approach is planned so that schemes can prepare properly”.
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