The Road to the Pensions Dashboard

Three separate consultation exercises to make the Pensions Dashboard a reality have been launched over the last 6 weeks. The DWP was first to publish its initial proposals for pensions dashboards for relevant occupational pension schemes in the Pensions Dashboards Regulations 2022 (the ‘Regulations’), consultation on which closes on 13 March. Next, came the Financial Conduct Authority (FCA) with its consultation in relation to the proposals for personal and stakeholder pensions – this will close on 8 April. Finally, the Financial Reporting Council published its proposals in relation to changes to AS TM1 which will ensure that when members receive statutory money purchase illustrations (SMPI) through the dashboard, these will be consistent and comparable across schemes and providers. Unusually, the Regulations are described as ‘indicative’. The consultation states that responses to the consultation will help to inform the final drafting of the Regulations and the DWP has been engaging with the industry through a series of webinars to identify and talk through concerns and potential issues. As such, there is potential for some of the detail to change.

The road to this point has been a bumpy one with the FCA first challenging the Government and the pensions industry to deliver pensions dashboards in 2016. With the first schemes being required to connect with the Pensions Dashboard on 30 June 2023, we focus on the Regulations and take a look at the decisions to be taken by trustees or managers of occupational pension schemes (including public sector schemes) at each crossroad, the potential obstacles in their path and what enforcement action may be taken for steering off course.

Who should read this update?

Whilst all pension schemes will be required to connect with the Pensions Dashboard, this update focuses on the obligations for occupational and public service pension schemes, both defined benefit (DB) and defined contribution (DC) and will be of interest to the trustees or managers of those schemes and their advisers.

What are the new obligations and what decisions must be made?

Trustees or managers of a relevant occupational pension scheme with 100 or more active and deferred members must:

• register and connect their scheme with the Money and Pensions Service (MAPS) within their ‘connection window’ – broadly in the one month period prior to their staging deadline (for master trusts with 20,000 or more relevant members this is extended to the three month period prior to their staging deadline). The method of connection used will have to comply with connection, security and technical standards to be published and have regard to connection guidance issued by MAPS from time to time. Trustees must retain records for 6 years of how they have compliantly connected or of any alternative steps they have to achieve the same result. The vast majority of software providers and third party administrators are expected to use an Integrated Service Provider (ISP) to help them connect to the dashboard. Whilst Altus and ITM have partnered to become the first commercial ISP, the Pensions Dashboard Programme has confirmed that over the coming months, a number of other ISP providers are expected to come to market. Trustees, managers and in-house administrators should engage with their third party administrators and software providers early to see how they are planning to connect to the dashboard;
• ensure their scheme remains connected unless all members become pensioners or the scheme otherwise falls outside the scope of the Regulations. MAPS must be notified of any changes in connection arrangements, scheduled downtime or maintenance and systemic issues such as cyber attacks;
• on receipt of a find request from MAPS or another qualifying dashboard service, complete matching having regard to published guidance. Retain any record of criteria decided upon for matching for at least 6 years. Trustees and managers will come up against two potentially conflicting legal duties here – the duty to successfully match a record to a dashboard user and data protection duties to keep member data secure and ensure that it is not disclosed to the wrong person. The Pensions Administration Standards Association (PASA) has published initial Data Matching Convention Guidance which helps schemes decide how to complete matching. Many schemes will have existing processes to match records with enquiries and use data fields such as surname, date of birth and national insurance number. Trustees and managers should work with their third party administrators and software providers to ensure the accuracy of the data that will be required for matching;
• on receipt of a view request (which a dashboard user can ask for once a successful match has been made) provide administrative, signpost and value data along with contextual information to MAPS within the statutory deadline:
  • administrative data is data relating to the scheme including name of scheme, description of benefit, whether the individual is an active or deferred member, date of joining scheme, date of birth and normal pension age, name and contact details for the scheme’s administrator and details of the employment that gave rise to the pension (name of employer and dates of employment);
  • signpost data involves provide a website link to the scheme’s statement of investment principles and implementation statement for DB schemes and costs and charges for DC schemes;
  • value data requires the provision of accrued and projected pension values (see Value Data below);
  • contextual information is information that helps the dashboard user to understand the view data and may include items such as the illustration date, whether the value has attaching spouse, civil partner or dependants’ benefits, whether benefits will increase in payment, that the information provided may only show a partial picture and that the dashboard user should contact the scheme regarding the value displayed.
• To ensure that values cannot be manipulated, the Regulations provide that the view data will need to be displayed in accordance with set design standards to be published by MAPS. Whilst the hope is that having received their view data, dashboard users will then contact schemes for further information, there are potential risks for trustees and managers in providing summary information, with a limited ability to set the context, where those values subsequently prove to be incorrect or incomplete. The consultation states that the standards will include information around the messaging that will need to accompany the value data which may help to limit any such risk. In particular it is hoped that the standards will include a requirement to state that members are not legally entitled to rely on the information provided to override the benefits provided under the scheme’s trust deed and rules;
• In terms of deadlines, find requests must be matched ‘immediately’ although further DWP or TPR guidance is expected on what this means in practice. Administrative and signpost data must also be provided immediately after a view request is received. For view data, where the information has been included in a benefit statement issued within the last 12 months, it must be returned immediately. Where that is not the case, it must be provided within 3 working days for DC schemes or within 10 working days for DB and hybrid schemes.

Who and when?

To allow the Pensions Dashboard to cope with the volume of schemes that will be connecting, it is proposing a phased staging approach starting with the largest schemes first, in the same way as schemes were required to comply with auto-enrolment obligations. Staging dates are set out in Schedule 2 to the Regulations. Master trusts with 20,000 or more relevant members will go first on 30 June 2023, followed by DC schemes used for automatic enrolment with 20,000 or more relevant members on 31 July 2023. The largest DB schemes (those with 20,000 or more relevant members) will stage on 30 November 2023 although due to delays in implementing the McCloud judgment, public sector pension schemes will not have to connect until 30 April 2024. The Local Government Association has expressed concern that even this date may be unachievable and has made this point in its response to the DWP’s consultation. Leading by example, the DWP has confirmed that state pension data will be available from ‘day one’.

A scheme’s staging date depends on how many ‘relevant members’ it has as at the reference date, which is the scheme year end date falling between 1 April 2020 and 31 March 2021. Relevant members are active and deferred members only so schemes with large pensioner populations may find that their staging date is later than they first thought. Once you have worked out your staging date, it remains fixed even if membership numbers change or a DB scheme closes to accrual and becomes a DC scheme. The only exception to this is if all scheme members become pensioners between a scheme’s reference date and staging date.

There is provision for schemes to stage early, voluntarily (if they have less than 100 relevant members at the reference date) or defer their staging deadline by up to 12 months by applying to the Secretary of State. The circumstances in which a deferral may be granted are limited, the most obvious example being where the scheme had embarked on a change of administrator before the Regulations come into force. The DWP expects to stage schemes with less than 100 relevant members from 2026.

Hybrid schemes will have a single staging date for the entire scheme, which will broadly be the earliest of the staging deadlines applicable to the DB or DC section. DB schemes with AVCs but no other DC benefits will be classed as DB schemes.

Potential obstacles

Value Data

• DC members must be provided with the value of their accrued benefits as at the illustration date along with an estimate of the value of their benefits at normal pension age. Both figures must be expressed as a pot and as an annualised figure. The figures in a member’s latest SMPI can be used. Trustees should ask their third party administrator to confirm whether any changes will need to be made by SMPIs produced by the scheme to comply with AS TM1.
• DB schemes will require more work, particularly in relation to deferred members. Active members must be provided with the value of their accrued benefits as at the illustration date along with an estimate of the value of their benefits at normal pension age (assuming they stay in service until that date and receive no salary increases). Deferred members must be provided with their accrued benefit value revalued in accordance with the scheme’s rules to the illustration date. Schemes that do not currently produce annual benefit statements for deferred members (of which there will be many) will need to speak to their third party administrator or software provider to put processes in place to calculate and store this information. Furthermore, if there is any uncertainty as to how DB benefits should be calculated under the scheme’s rules, these should be resolved so that trustees and managers can be confident of the accuracy of the value data being provided through the Pensions Dashboard.

Data Protection

• There has been much written about the security of personal data flowing through the Pensions Dashboard’s digital architecture. The standards that those connecting to the dashboard must comply with have yet to be published but we can expect them to be robust as a failure by one party to comply could pose a risk to the security of the entire Pensions Dashboard. The consultation states that the standards are likely to include a requirement to register with the Governance Register, build (or secure) Find and View and a User Managed Access (UMA) interface, complete software and security conformance testing, obtain a software certificate from the Governance Register and complete a test cycle.
• In its consultation workshops, the DWP confirmed that the Pensions Dashboard will be a data controller in its own right and that, as such, trustees will not need to enter into a data sharing agreement with it. Trustees’ responsibility for data flowing through the dashboard ends once it has responded to a find or view request. MAPS (through the Consent and Authorisation Service) will be responsible for obtaining pension dashboard users’ consent to their data being sent to schemes to search for benefits. Trustees will be able to rely on ‘compliance with a legal obligation to which they are subject’ as their legal basis for processing personal data. However, trustees should review and update their data processing agreement with their third party administrator and their privacy notices, seeking legal advice where appropriate.

Enforcement

Part 4 of the Regulations sets out TPR’s enforcement powers to ensure compliance with the new requirements. Trustees and managers will be responsible for compliance although TPR does have power to issue a third party compliance notice if it is of the opinion that the trustees’ breach of duty has been caused by a third party, such as a third party administrator or ISP. Penalties are discretionary and the first stage would be for TPR to issue trustees or managers with a compliance notice specifying what steps they must take to ensure compliance with the Regulations. If TPR is of the opinion that the trustees/managers have then failed to comply with the compliance notice, TPR may issue a penalty notice, and impose a civil fine of up to £5,000 for individual trustees or £50,000 in other cases.

TPR is planning an education campaign and targeted communications to help trustees and managers understand what they need to do to get ready for the Regulations. It has said it will be supportive and pragmatic in its approach to enforcement and compliance and will be consulting on its proposed compliance and enforcement policy over the summer. However, where there is intentional non-compliance, they will be robust.

It is a ‘per request’ enforcement regime so TPR may issue multiple penalty notices in one document if there have been multiple failures to comply with find or view requests from dashboard users. The consultation states that this is deliberate to act as a significant deterrent to non-compliance.

Next steps for trustees

• Check your scheme’s staging date. Hybrid schemes may need legal advice on this;
• In conjunction with your third party administrator, decide on what criteria you will use for matching find requests. Take a look at the PASA Data Matching Convention Guidance to help with this;
• Given that view requests must include projected values to normal pension age, consider whether you need legal advice to confirm what is normal pension age under your scheme’s rules for all members as this is not always straightforward;
• DB schemes in particular will have a lot to do to prepare. If there is any uncertainty as to how scheme benefits should be calculated under the rules, do not underestimate the time needed to investigate potential errors, obtain legal advice, re-calculate and rectify benefits;
• Speak to your third party administrator or software provider to:
  • see if they intend connecting with the Pensions Dashboard directly or through a third party ISP. Ask them what they are doing to prepare;
  • see what can be done between now and your scheme’s staging date to resolve any data gaps;
  • discuss whether any changes will need to be made to SMPIs produced by the scheme to comply with AS TM1;
  • put processes in place to calculate and store value data for DB deferred members. Getting DB schemes ready for the Pensions Dashboard will be a significant project for third party administrators (especially if there are queries regarding benefit calculation) and is a project that they will be conducting for multiple schemes within a relatively short timeframe. Trustees should, therefore, discuss resourcing with their third party administrator as soon as possible;
  • revisit and update data processing agreements, taking legal advice where needed;
• Consider whether privacy notices also need to be updated to allow for provision of data to the Pensions Dashboard.

We are well placed to advise pension schemes of all sizes on their preparations for the Pensions Dashboard. If you would like to explore this topic further, please contact your usual member of our Pensions team.