The government has responded to its consultation on draft regulations setting out the detailed requirements for pensions dashboards. In addition, the Pensions Dashboards Programme (“PDP”) is consulting on the standards that schemes and dashboard providers will need to comply with.
As a reminder, pensions dashboards will allow an individual to view information about all their pension savings (including their state pension) on a single website, even where the individual has savings in multiple pension schemes. The Money and Pensions Service (“MAPS”) will provide a non-commercial dashboard, while other entities will be able to provide dashboards if they are authorised to do so by the Financial Conduct Authority (“FCA”). The legislative framework for the pensions dashboard ecosystem is set out in the Pension Schemes Act 2021, while the draft regulations set out the detailed requirements.
Broadly, trustees will have to meet requirements relating to: (a) cooperation and connection to the dashboard ecosystem, (b) provision of pensions data to the dashboards, and (c) record-keeping and reporting. The requirements only apply to schemes with 100+ active and/or deferred members (“relevant members”). For more information on the draft regulations, please see our legal update.
Government consultation response
The government plans to make changes to the draft regulations. The key points in the response include:
Staging deadlines – The staging deadlines for the first two cohorts (master trusts with 20,000+ relevant members and DC schemes being used for automatic enrolment with 20,000+ relevant members) will be deferred by two months. In addition, the provisions on the staging deadline for hybrid schemes will be changed so that the scheme would total the relevant members across both the DC and DB sections and the entire membership would be treated as a DB scheme to determine the staging deadline. This may mean that some hybrid schemes have an earlier staging deadline, while others have a later staging deadline, but no hybrid scheme will have a staging deadline that is earlier than 30 November 2023. Hybrid master trusts will be treated in the same way as other hybrid schemes and will therefore have a revised staging deadline of 30 November 2023 at the earliest.
Deferral of staging deadline – In addition to the requirement for deferral applications to be made within 12 months of the regulations coming into force, applications will also need to be made at least two months before the scheme’s staging deadline. No changes will be made to the circumstances in which a deferral application can be made.
Provision of data – Increased flexibility will be introduced in relation to the provision of value data. In particular:
- Data will be provided by reference to the individual’s “retirement date” rather than “normal pension age”.
- Annualised accrued values will be calculated as if the individual had reached their retirement date on the illustration date.
- Where an individual has defined benefits which have different retirement ages for different tranches, schemes will be able to choose whether to provide:
- a combined benefit value covering all the tranches, together with a single common retirement date; or
- a separate values for different tranches, together with a retirement date for each.
- For two years after their staging deadline, schemes will be able to use a simplified approach when calculating accrued DB values for deferred members.
- If the scheme rules provide for a cash balance benefit to be provided as a lump sum only, the scheme will not need to provide an annualised benefit value.
- For hybrid benefits (e.g. benefits with an underpin), schemes will be able to choose whether to apply the DC or DB calculation methodology based on what they consider to best represent the value of the benefit.
The government response also clarifies the deadlines for schemes to provide the various categories of data.
Matching – The process for resolving possible matches will be clarified.
Schemes in Pension Protection Fund (“PPF”) assessment or wind-up – The final regulations will include provisions dealing with schemes in PPF assessment or in wind-up. Where an entire scheme is already in PPF assessment at the time of its staging deadline, it will be exempt from the requirement to connect. However, if one or more sections of a scheme are not in assessment, the entire scheme will be required to connect. If a scheme or section enters PPF assessment after it has connected, the scheme will be required to maintain connection, but need only provide administrative data. Schemes (or sections) that subsequently exit PPF assessment, but do not enter the PPF will be required to meet the full connection and data provision requirements after exit.
Schemes (or sections) in wind up will still be required to connect, but will only be required to provide administrative data. Trustees can choose to provide value and signpost data if they consider it appropriate to do so.
Data protection – The response also gives some detail on the views of the Information Commissioner (“ICO”) about data protection in the context of pensions dashboards. In its response to the government consultation, the ICO noted the importance of schemes ensuring that data remains accurate and up to date. When setting matching criteria, schemes must consider the data minimisation principle i.e. schemes should identify (and hold) the minimum data necessary to enable them to accurately identify matches. The matching process is an operation that will require a data protection impact assessment under the UK General Data Protection Regulation (“UK GDPR”). The ICO also noted the need for schemes to ensure the secure processing of data. The considerations that schemes should take into account in this area under the UK GDPR include the cost of implementation and the significant risk to the rights and freedoms of the individual.
In meeting the requirements imposed by the regulations, trustees will need to comply with standards to be issued by MAPS and have regard to guidance to be issued by the government and the Pensions Regulator (the “Regulator”). The PDP, the body established by MAPS to develop the pensions dashboards ecosystem, is consulting on the following standards:
- Code of connection – This sets out how schemes and dashboard providers are to connect to the dashboards ecosystem and what they need to do to remain connected. It details the security, service and operational standards that schemes and dashboards providers must adhere to.
- Data standards – These set out the data formatting requirements that schemes must follow when returning pensions data. They are designed to help schemes understand how to provide the data.
- Technical standards – These are what schemes and dashboard providers will use to interface with the central technical architecture of the dashboard ecosystem and/or each other.
- Reporting standards – These set out the data that schemes and dashboard providers must supply to the Regulator, the FCA, the PDP (on behalf of MAPS) and the government.
- Design standards – These will set out the requirements that dashboard providers must follow for design of the dashboards and presentation of data on the dashboards. Rather than publishing draft standards, the PDP is calling for input on what these standards should contain.
The PDP has also published the following guidance accompanying the standards:
- Connection process and guidance – This sets out what connecting to the dashboards ecosystem will involve and explains what schemes and dashboard providers should expect when connecting and the steps they will need to take. It also provides guidance on the likely duration of each step. It contains both statutory guidance (to which schemes must have regard) and recommended guidance.
- Data usage guide – This describes how the data is used, and when to send each section of data. It is designed to help schemes understand how to choose which data items held in their systems are required. An appendix provides worked examples of how schemes might fill out the data required in the view message. The guide contains recommended guidance only.
- Early connection guidance – This sets out when schemes can apply to connect to the dashboard ecosystem earlier than their staging deadline and the process they need to follow. It is statutory guidance.
- Approach to governance of standards – This sets out how the PDP has developed the standards, outlines their scope, and describes the process for making any future changes to them.
The standards consultation closes on 30 August 2022.
The final regulations have not yet been published and the government has not confirmed when they will come into force. However, if they have not already done so, trustees and administrators should start planning now for the introduction of pensions dashboards, including establishing when the scheme’s staging deadline will be.
The PDP has published guidance to help schemes prepare, and the Regulator has published initial guidance for schemes which includes a checklist. The Regulator will publish more detailed and up to date guidance later this year, which will reflect the final regulations and the MAPS standards. The Pensions Administration Standards Association has also published guidance for schemes.
For more information, or advice in relation to the pensions dashboards requirements, please speak to your usual Mayer Brown contact.