- The Pension Schemes Act 2021 (PSA 2021) provides the legislative framework for pensions dashboards.
- The PSA 2021 only contains the broad structure to lay the legislative foundation. Detailed requirements are to follow in regulations.
- The PSA 2021 amends the Financial Guidance and Claims Act 2018 to require the Money and Pensions Service to provide a pensions dashboard service, a digital interface which allows an individual to see all their pension savings in one place.
- The PSA 2021 also amends the Pensions Act 2004 to introduce provision for “Qualifying pensions dashboard services”. These are commercially provided dashboards that meet certain prescribed requirements, conditions and standards.
- The PSA 2021 requires trustees of occupational pension schemes to provide pensions information through the qualifying dashboards. Trustees may also need to comply with certain standards, specifications or technical requirements.
- The PSA 2021 also makes amendments to the Financial Services and Markets Act 2000 to require the FCA to make corresponding provision in relation to personal and stakeholder schemes.
Pension dashboards in more detail
The Pension Schemes Act 2021 sets out the legal framework for pension dashboards and, with it, a data-driven revolution in pension savings. Pensions dashboards are intended to enable individuals to access all of their pensions information online, securely and all in one place.
The policy intent is that this will result in greater engagement with retirement savings and support better planning for retirement. Pension dashboards are intended to provide clear and simple information about an individual’s multiple pension savings, including their State Pension. They will also help them to reconnect with any lost pension pots and, ultimately, may provide the platform for consolidating multiple small pension savings pots.
Pension dashboards promise to be the pension industry’s equivalent to the financial service industry’s open banking standards. By creating a standardised and open Application Programming Interface (API), existing providers and start-ups will be able to develop products and services that could vastly improve member experience and engagement.
Mandatory duties to comply with pensions dashboards will apply to the largest pension schemes in the UK in 2023. Voluntary participation will, however, be available to certain partner schemes in 2022. Implementation will then be rolled out over a period of two years to smaller schemes.
The PSA 2021 introduces provision for “Qualifying pensions dashboard services” which are commercially provided dashboards that meet certain prescribed requirements, conditions and standards.
The detail of these requirements, conditions and standards will be set out in regulations but are likely to include:
- the information to be provided to individuals, in what circumstances and how requests for information should be dealt with; and
- the requirements relating to the establishment, operation and maintenance of the dashboard, what approvals will be needed and from whom.
How will this affect trustees of pension schemes?
Trustees will be required to comply with certain standards, specifications or technical requirements. There are likely to be reporting obligations in relation to the Trustees’ compliance as well guidance to assist with compliance which Trustees will have to have regard to. The detail will be in regulations but is likely to include:
- what pensions information will need to be provided, for instance information on an individual’s rights and obligations under the scheme, the pensions and other benefits to which they are or may be entitled and information on the position of an individual in relation to the scheme;
- the circumstances, manner, form and time in which it must be provided, the steps to be taken before it is provided, and also the way in which the information must be held; and
- requirements on the use of electronic communications, facilities or services, including relating to the secure transmission of information or verifying the identify of a person.
What do trustees need to think about now?
Getting data ready
Trustees may need to invest in new or upgraded IT and software to provide data to dashboards. They will also need to put in place governance procedures to ensure regulatory compliance. This will all come at a cost.
Trustees will also need to ensure their data is accurate and of sufficient quality to be used for pensions dashboards. This may require Trustees to work on improving the data they currently hold.
The obligation to participate in dashboards will be staged and apply to the largest pension schemes first. It is envisaged that this will start in 2023, with a period of voluntary participation starting in 2022.
Be aware that the regulations are likely to contain provisions to ensure Trustees comply with requirements, such as:
- the power for The Pension Regulator to issue a compliance notice or third party compliance notice; and
- the ability for The Pensions Regulator to issue penalty notice (of up to £5,000 in the case of an individual, or £50,000 in other cases).
What does this mean for scheme sponsors?
There is going to be a cost outlay for trustees in getting ready to meet the requirements placed on them and ultimately sponsors will be meeting this cost.
Sponsors will also need to support trustees in providing the data they hold, and the trustees will need, to them promptly.