Pension dashboard - opportunity or threat
12 January 2018
This article was featured in the February 2018 issue of the magazine.
Henry Tapper, director of First Actuarial, discusses the issues
The Department for Work and Pensions (DWP), flush with successfully delivering automatic enrolment (AE), is now setting its sights on delivering a ‘pension dashboard’ that should allow every adult in the UK to see their pension rights, not just those from the state but from occupational and personal pensions too.
The idea was originally the Treasury’s, which saw the government’s role as facilitating the free flow of data from one source to another though the establishment of common data standards and security protocols. The DWP intends to expand on this role making the government responsible not just for facilitation but the aggregation and even display of data items.
Both AOL and CompuServe were media titans in the early days of the Internet. They assembled content and services into ‘walled gardens’ only accessible to their subscribers. As everyone who built a personal homepage or made a MySpace page knows, this model was overthrown by the open access and publishing model of the world wide web (www). Anyone could publish content accessible by anyone else around the world.
The www model that has stood the test of time, not only in the web as a content platform, but also in the trend towards large digital data platforms: Facebook, Google, Twitter and many other services offer application programming interfaces (APIs) which allow ecosystems to flourish that build on their services.
Huge numbers of pages in the business press have been dedicated to the power of platforms and APIs, and the UK government has many times championed the value of innovative ecosystems to drive growth and productivity in our economy. The Government Digital Service has even been using the term ‘Government as a platform’ (http://bit.ly/2B9J2uE) to describe its new standard approach to technology and public services.
...pensions dashboards could be delivered by the private sector more quickly and vibrantly...
It’s sad to see big-government imposing its footprint on what could have been a dynamic service delivered by our thriving fintech industry. With common data standards and security protocols delivered by government, pensions dashboards could be delivered by the private sector more quickly and vibrantly than government ever could.
But what is more worrying is the threat that pension operators will be required to feed data into this hub, regardless of the risks and costs.
There are likely to be substantial costs. While the more modern systems will be able to use APIs most of the legacy systems won’t. Compulsion will mean data passing using CSV files with all the risk and cost we have seen with AE.
My suggestion to the DWP is that they adopt a staged approach, with the operators capable of providing data using the common data standards and APIs going first and those with legacy issues following when they are ready. This puts the onus on those at the back to upgrade in an orderly fashion and reduces the risk of the wrong data going public (or worse getting lost).
There is a gain to the public of getting a single view of all pensions data, but it is not gain enough for a ‘big bang’ approach. While it is sub-optimal for people to see some of their data on a dashboard and some available in traditional ways, it is better than data mismanagement. If the pensions dashboard waits for everyone to be ready, we will not have a dashboard for years or possibly a decade. A staged voluntary system beats a compulsory system.
There is a third problem I have with the DWP’s approach to the pensions dashboard and that is the amount of DWP resource that it would tie up. There are other matters that need attention; some – like the master trust regulations – are in hand, but others, like the completion of the defined ambition regulations, have been mothballed for some time.
In December 2017, the moderator of a long-running dispute between Royal Mail’s pension scheme and its members called on both sides to get behind a collective defined contribution scheme. Both sides have done this, and strike action is no longer imminent. However, the resolution of the crisis can only happen if the DWP provide help and complete the work it mothballed in 2015. If the pensions dashboard is cited as preventing DWP from doing this work, then 140,000 postal workers should be asking serious questions about the scope creep of what many are already calling a ‘vanity project’.
It is not too late to stop the DWP in its tracks. The ideas that it has been sharing with its stakeholders (of which my firm is one) are still at the consultation stage. But I fear that the DWP is locking itself into an echo chamber where the only voices it hears are those that agree with it.
Politically the DWP is being driven by the pensions minister, Guy Opperman, who has stated that the pension dashboard will happen. The dashboard should happen, the original conception by the Treasury was right and there would be great benefit to many in seeing all pensions in one place.
We can only hope that the DWP get this message before another government IT project gets into trouble.