The quest to define data standards
Richard Smith, Head of Industry Liaison on the Pensions Dashboards Programme, rounds up the activity on data standards over the Spring and Summer, and gives a very big thank you to industry.
In the six months since I last wrote about our work on data standards, the pensions and wider industry has been incredibly willing to help us think hard about the data standards for initial pensions dashboards.
For all this support and help, all of us on the Pensions Dashboards Programme are enormously grateful – thank you to everyone. Since publishing the data working papers in April, we have been busy progressing our thinking on data standards with the help of the Data Working Group that was convened earlier in the summer and of course, the Call for Input commenced at the start of July and closed just a few days ago.
We’ve received over 60 detailed and comprehensive responses and are now reviewing, and reflecting on, all this varied and valuable input with the aim of publishing a summary of the responses to the data Call for Input in the autumn and an initial version of the data standards for pensions dashboards, currently targeted for the end of the year.
So, what have we learnt?
I don’t want to pre-judge the outcome of the Call for Input, however, I can share three key headlines from the DWG activity over the summer:
Getting data standards right will be challenging – and they will undoubtedly evolve over time:
This wasn’t a great surprise, of course, but the myriad challenges involved have been clearly articulated and reconfirmed over the summer months.
Those working in the pensions industry are all too familiar with the incredible complexity underpinning the full range of pensions that exist in the UK which are far more complex and varied than those of any other country which has delivered a pensions dashboard.
But most individuals aren’t at all interested in all this complexity – they just want a simple view of some consistent basic information about all their pensions.
There will need to be a continual loop of user testing and refining the data standards: ensuring that users can understand the information that they’re being presented with on initial pensions dashboards, whilst also reflecting (at an appropriate level of detail) the key underlying complexities surrounding their pension entitlements.
Sophisticated approaches to matching will be required to enable full coverage:
Being able to confidently digitally match individuals to all their pension entitlements is at the heart of the whole pensions dashboards endeavour.
For a significant proportion of the pension entitlements they hold, many pension providers and schemes think they will be able to successfully match pensions against the individual’s National Insurance Number (NINo) and their Date of Birth (DOB), plus one other data item (such as the individual’s Name).
But there are known issues with the accuracy of some NINos received from employers or inherited from previous administrators. And when individuals move house, or change name, they can often fail to notify their pension provider to update their data.
Unless schemes are able to positively match against all these items, they will be reluctant under data protection rules to return pension information for the individual to view on their chosen pensions dashboard.
However, when an individual uses a dashboard, this may create an opportunity to correct such data anomalies through existing data processes, which is good for both the individual and the scheme. But this will have to be done incredibly carefully to ensure the security of the individual and their data at all times. These data processes will need to be extensively tested with test dashboards and volunteer schemes from next year.
Estimated Retirement Incomes (ERIs) are key, but extremely problematic:
Research carried out to date has shown the importance of displaying Estimated Retirement Incomes (ERIs) for each pension on dashboards. This need increases the older the individual is.
That’s why we included “comparable ERIs” as one of the key long-term goals for pensions dashboards in our Progress Update Report in April.
As Government set out in its April 2019 consultation response that initial dashboards won’t do pension projections, pension providers and schemes will have to supply these ERIs.
However, we now know that many DB schemes have deliberately chosen not to show ERIs on annual statements, instead directing members to scheme-specific retirement calculation modellers on their websites. And for many deferred DB members, no yearly statements are produced at all.
For DC ERIs, which, on the face of it should be simpler, many stakeholders feel that showing different Statutory Money Purchase Illustration (SMPI) incomes from different DC pots alongside each other on pensions dashboards is problematical for several reasons. This is an incredibly thorny issue.
What do we take away from all this?
In a conversation earlier this year with an international dashboard provider, they compared delivering dashboards to being like the quest for the Holy Grail.
In a post-Covid world, when employment is perhaps even more transient and churning, knowing what pensions you’ve got, and where they are, is going to be more important than ever. Individuals will find dashboards tremendously helpful – we know it’s going to be worth it – but it’s going to be a hard task.
The energy and enthusiasm of so many willing industry volunteers to help us find solutions to the data standards challenges suggests that the pensions industry knows this too.
By the end of the year, we will be publishing the first version of data standards for subsequent user testing. This means that pension schemes and providers can begin to act in earnest.
Whilst it won’t be easy, the significance of pensions dashboards in supporting better planning for retirement and growing financial wellbeing should not be under-estimated and we should all therefore remain fully committed to the quest.