As a consumer, I am a big fan of the concept of dashboards. A brilliant idea. As a lawyer advising pension plan trustees, I am looking forward to helping my clients to make them a reality. Until now, dashboards have felt a long way off in the future and there has been no shortage of pressing work to do (Guaranteed Minimum Pension equalisation anyone?). However, we received a lot more information with the publication of the DWP’s consultation on 31 January – 137 pages’ worth.
Given the evident complexity, I have to say that recent criticism levelled on the pensions industry for not having taken action voluntarily feels a bit harsh. The investment is huge in terms of both time and money and personally I believe it is unrealistic to think that dashboards could ever have come to fruition without compulsion.
There is a lot to digest as we prepare Squire Patton Boggs’ detailed response to the consultation but here are a few immediate thoughts on the proposals:
- The first deadline, applying to the largest Master Trust schemes, is 30 June 2023. But the subsequent timescales for much smaller schemes might be shorter than expected. Schemes with only 1,000 relevant members could be required to stage by 29 February 2024 if the scheme provides defined contribution (DC) benefits and is used for automatic enrolment. For hybrid schemes, the entire scheme stages together, which may result in an earlier staging deadline than is expected – for example, a defined benefit (DB) section may be caught by an earlier staging deadline triggered by the DC section in the same scheme. The circumstances in which staging can be deferred are very limited.
- Trustees will need to review their contracts with third party administrators to make sure they will comply with the tight timescales envisaged. For example, deferred DB members must be given a revalued benefit figure within 10 days of a request. Schemes that currently only calculate this when deferred members take their benefits will need to update their processes.
- We all know the challenges inherent in keeping complete and accurate data over many decades. Many schemes have been focusing on improving their data for some time but, with the best will in the world, from time to time mistakes do happen. Who will be legally responsible if a member receives inaccurate information?
- How can trustees ensure that their scheme’s data will be held securely if there is no contract with the dashboard? I accept that this will be a highly regulated area, but my concerns around data management will not be dispelled until I have seen additional evidence of how the data protection obligations will be managed and where the various responsibilities lie.
- There is a lot of detail to get to grips with. Trustees are likely to need training in order to understand their obligations and be in a position to ensure their administrators have effective systems to comply. A lot of automation is expected for a pensions system to be “dashboard ready.”
- Although it is reassuring that The Pensions Regulator is making soothing comments about its approach to the penalty regime (at least initially), it is worth noting that it has power to fine trustees on a per breach basis – up to £5,000 for individual trustees or £50,000 for a corporate trustee. The consultation makes clear that this is a deliberately tough regime to incentivise compliance.
I know what I am going to be doing between now and the consultation deadline (13 March). Happy reading!
The opinions expressed are those of the author and do not necessarily reflect the views of the Firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.