Pensions; Pensions dashboards data standards guide published and more.

• Pensions dashboards data standards guide published
• Small pots working group report published
• State benefits and pensions for UK nationals in the EU, EEA or Switzerland from 1 January 2021
• DWP consultation: The occupational and personal pension schemes (general levy) regulations review 2020

 

 

Pensions dashboards data standards guide published

(AF3, FA2, JO5, RO4, RO8)

The Pensions Dashboards Programme data standards guide contains the detailed information on the data elements that will be required for initial dashboards. Aimed at the technical audience responsible for working on pensions data, its contents should ensure that providers can prepare their data for onboarding to pensions dashboards.

It includes definitions of the overall process, the high-level data elements and a technical breakdown of each data element, plus examples of how the data elements should work, using example data.

Data standards are an essential part of the pensions dashboards ecosystem. They create the common language that will allow for the exchange of data between UK pension providers and individuals using pensions dashboards. 

In addition to the detailed guide the PDP has published a high level over view video that can be viewed here.

Small pots working group report published

(AF3, FA2, JO5, RO4, RO8)

The small pots working group have published a report to the Minister for Pensions and Financial Inclusion with recommendations to tackle the growth of deferred members with small pension pots in the Automatic Enrolment workplace pensions market.

Summary of Recommendations

The Group identified the following conclusions, recommendations and actions for the pensions industry and Government to work together to develop effective solutions, with the aim of delivering better value for scheme members. The working group are calling on the pensions industry including pension providers, their representatives and delivery agents, working jointly with Government and regulators, to take forward these recommendations over the medium term. These recommendations are as follows:

• The pensions industry, Government and regulators should continue to explore and enable opportunities for member-initiated consolidation, with proportionate member safeguards, particularly in respect of deferred, small pots above a certain value. This can complement other interventions that will be necessary for deferred low value pension pots. Technology and tools, such as Pensions Dashboards that allow members to view all pots with different providers in one place, could facilitate more consolidation in the future.
• Member-led consolidation alone, however, is unlikely to change the trend in the growth of defined contribution (DC) deferred, small pots. The pensions industry, working jointly with Government, should prioritise action on enabling automatic and automated large-scale low-cost transfers and consolidation for the AE mass-market. Member safeguards should provide proportionate protection, but not act as a barrier.
• Where pension providers are holding multiple pots within charge-capped default funds for the same deferred members, the direction should be to consolidate those pots. Recognising, however, that it is not always possible or desirable (for example because of member consent associated with scheme terms and conditions), we recommend pension providers should in the interim work towards implementing a single consumer facing view (within a single member portal, with information on their pension pots). It could be achieved, following scoping work in 2021/22, through adoption of industry best practice and regulatory guidance.
• The pensions industry should establish operational focussed groups, to investigate and address administrative challenges which will be necessary to underpin mass transfer and consolidation systems that can be delivered at scale within the AE market. Consideration will need to be given to the appropriate governance structure to ensure effective transparency and reporting arrangements. The groups should focus on the following areas, with the aim of making available an initial publicised update in summer 2021.

1. Activity should be prioritised on scoping the core minimum viable administrative processes, including:

• Developing and testing data that would provide sufficient matching capability, compliant with data sharing legislation, (as a proxy for a unique reference) to verify the identity of the person whose pot(s) will be transferred is the same as the identity of the person whose pot will receive the transfer. Opportunities to build out from data-matching in relation to Pensions Dashboards; the PPI’s work on the Pensions Data Project and industry good practice should be maximised.
• Developing and adoption of common standards is a key underlying element to support effective consolidation. The Pensions Dashboards data standards6 would provide a starting point to build out from, which could then be tested by providers ahead of confirming standards which could be codified by the industry.
• Identifying requirements for a low-cost bulk transfer process. This should start with an end to end review of the current individual transfer process to identify where cost occurs in the system and where friction can be removed – however mass transfers which are non-member led may necessitate new approaches to achieve low-cost delivery, while maintaining proportionate safeguards for members. 

1. Member-exchange proof of concept trials involving low value small pots within master trust schemes to test the concept should be developed and prioritised, starting with a feasibility report in summer 2021, following in-depth scoping work:

• This should involve trustees and finance directors to test if they are prepared to run proof of concept trials and if it can provide sufficient learning for purposes of a real-world context and outcomes, with consideration of legal and other factors;
• Proof of concept trials offer opportunity for learning through testing administrative processes in the context of mass transfers and consolidation.
  • This includes, the prospect to investigate and test matching capability; use and development of data standards; the costs in the transfer process, in addition to end to end customer journey mapping and the appropriate safeguards necessary for members, with potential qualitative feedback gathered from those whose pots were consolidated.
  • In order to build beyond the proof of concept trials and ensure learnings are more broadly applicable, it requires the involvement of a wider group of stakeholders, including contract-based providers, consumer representatives and regulators.
• Consolidation system models can be prioritised, but final decisions should be informed and developed following the pensions industry’s investigation and examination of administration processes and systems through an operational group. There are two automatic transfer and consolidation models that should be prioritised for low value small pots – the default small pot consolidation scheme (‘default consolidator’ including the various design choices) and the automatic pot follows member model. These models are discussed in-depth in Chapter four.
  • We recommend that the Department, working with the pensions industry, should start to develop an initial costs/benefit analysis in the latter half of 2021 to help to further assess the models, including how these models complement Pensions Dashboards and reflect learning from the work on administrative processes to help better understand the VFM considerations, as far as evidence allows.
  • The pensions industry, working with the Department, should develop customer journey mapping in relation to the models to understand the end to end process and to provide a deeper appreciation of the impacts, mindful of changes to the operating and delivery context.

Comment

Although consolidation is often the correct response, members should always be given the option to decide when and how consolidation should occur. Care needs to be taken to ensure that any changes implemented include safeguards and the pension member’s best interests is at the forefront of any actions taken. 

State benefits and pensions for UK nationals in the EU, EEA or Switzerland from 1 January 2021

(AF3, FA2, JO5, RO4, RO8)

The Department for Work and Pensions (DWP) has updated its guidance, on state benefits for UK nationals living in the EU, EEA or Switzerland from January 2021.  

The guidance confirms that UK nationals living in the EU, EEA or Switzerland can carry on receiving and claim their UK State Pension. 

It also confirms that UK State Pensions will be increased each year in line with the rate paid in the UK. 

Relevant social security contributions made in EU countries can also count to meet the qualifying conditions for UK State Pension. 

DWP consultation: The occupational and personal pension schemes (general levy) regulations review 2020

(AF3, FA2, JO5, RO4, RO8)

The Department for Work and Pensions (DWP) has launched a consultation on proposals to change the structure of the levy – the annual charge paid by pension schemes; and raise rates for the next three years, from April 2021 onwards.

The levy helps fund three arm’s-length bodies sponsored by the DWP: The Pensions Regulator; The Pensions Ombudsman; and The Money and Pensions Service. It also funds part of the development costs for the pensions dashboard.

The levy rates were last increased in 2008/09, and were reduced by 13% in 2012/13. However, the levy deficit is expected to reach approximately £80 million by March 2021.

In considering its options, the Government states that it has sought to balance the need to adequately fund the pensions bodies, while also limiting its impact on the pensions schemes that fund it.

Minister for Pensions Guy Opperman said:

“Changes within the pensions industry and regulatory landscape have resulted in growing responsibilities for the DWP’s pensions bodies, putting additional pressure on their expenditure. Whilst the government has protected the industry from increases in the levy over a number of years, we can no longer avoid the fact that action is needed to bring levy rates back into balance with expenditure.”

The levy is payable by the trustees of registrable occupational and personal pension schemes. The amount levied on individual schemes is calculated based on the number of scheme members.

The consultation outlines three options:

1. Increase the rates and introduce separate levy rates for Defined Benefit, Defined Contribution, Master Trust and Personal Pension schemes.
2. Increase the rates and introduce a separate, lower set of rates for Master Trusts.
3. Retain the existing levy structure and increase the rates.

The consultation closes at midday on 27 January 2021.