ASSOCIATION MEMBER-DIRECTED PENSION SCHEMES

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1 AMPS Response to the Department for Work & Pensions paper Pensions Dashboards Working together for the consumer The Association of Member-Directed Pension Schemes (AMPS) is the main trade body concerned with the interests of those professionally involved in the administration and trusteeship of those types of pension scheme for which the members determine the manner of investment. Those scheme types are principally small self-administered schemes (SSAS) and self-invested personal pensions (SIPP). Responses to Questions Wider benefits of a dashboard I. What are the potential costs and benefits of dashboards for: a) individuals or members? The paper does not address any costs that would be borne to the consumer in the creation or maintenance of either commercial or government led dashboards. If a cost was to be considered to be passed on to consumers, it would seem sensible for a commercial dashboard to invoice the consumer each time the dashboard is accessed, or to provide an annual fee that would give 12 months constant access. However a cost to the consumer might make them less likely to use a dashboard facility, when the object of a dashboard is to be of a help rather than hindrance to consumers. We agree with the consultation paper, in that a dashboard would be of considerable benefit to consumers by way of making them more engaged with their pension(s). b) your business (or different elements within it)? AMPS members provide a range of pension schemes including fund management platform based SIPPs, or bespoke SIPPs and SSAS services; typically allowing consumers to hold various types of assets including securities listed on a recognised exchange, commercial property, investment grade gold bullion, private company shares and deposits. There is also the possibility for an individual that is connected to a SIPP or SSAS to lend money to their pension scheme on a commercial basis for the purchase of assets, such as commercial property, as a high street bank would do. It is possible that platform operators would be able to integrate in to a dashboard with ease and so the associated costs could be much lower than the integration of a bespoke SIPP or SSAS operator, where the investments are not held in one place as they are with a platform. Page 1 of 7

2 Costs for the integration between a platform provider and dashboard could be met by way of a levy or license fee against a platform provider, based on the number of individuals they held within their SIPP at the start or end of the fiscal year. However for a bespoke operator there would need to be a higher level of architectural integration and consequently a higher level of resource required to implement a connection with a dashboard/multiple dashboards. The costs involved could considerably increase a bespoke firms operating cost, which would inevitably have to be passed on to the consumer. The paper does not provide details itself on where and how costs might be met but we hope that any outcome on cost is fair and proportionate to both the pension provider and pension scheme member. Architecture, data and security II. Do you agree with: a) our key findings on our proposed architectural elements; and The architectural elements detailed in point 123 seems to provide a sensible link up (in theory) between consumer and data providers, without the feeling that a consumer would find the task of accessing their pensions arduous. Integration into a dashboard/multiple dashboards would ensure that consumers are accessing all elements of their pension. However the design of any dashboard where a bespoke pension provider is required to upload data will need further exploration for the linking in of all investments especially where these are derived from multiple sources such as different investment managers etc. It is also not clear how often data would need to be uploaded to the dashboard, something which we presume will become clear through any technical consultations. b) our proposed architectural design principles? We are encouraged by the comments in points 80 and 83 which show that consumers would prefer one Dashboard and one that instills trust such as if it were provided on behalf of Government. We note that this is the Government s preferred approach too and we would support this. These should provide a secure link up to a consumer facing environment and GDPR portability and accuracy has been considered; it is up to the consumer to contact their pension provider to correct any details they see that are not correct, which consequently is a positive for communication between a pension provider and consumer, where the latter has left data out of date. Trusted third party access would help regulated financial advisers reviewing a client s position in a timely manner. It would seem that consumers are less likely to be inadvertently contacted by scammers, or unregulated advisers. It might be that an additional layer of security, such as a personal identification number, might be necessary for any third party users. Page 2 of 7

3 Providing a complete picture III. Is a legislative framework that compels pension providers to participate the best way to deliver dashboards within a reasonable timeframe? We would agree that overall this type of approach to deliver dashboard from a consumer s perspective would be sensible. One dashboard as opposed to multiple dashboards could have the effect of aiding some form of compulsion as only one model needs to be considered within the industry. However, as previously mentioned bespoke SIPP and SSAS operators could struggle to integrate some of their assets in to a dashboard situation and therefore careful consideration needs to be made in this area of the industry as to whether or not a timeframe is a suitable approach. IV. Do you agree that all Small Self-Administered Schemes (SSAS) and Executive Pension Plans (EPP) should be exempt from compulsion, although they should be allowed to participate on a voluntary basis? Despite the challenges that could face a SSAS operator, it would be useful to try and integrate such schemes at some level. The main reason for this would be to help reduce the impact of scammers on these types of schemes. Where a professional trustee, or FCA regulated scheme administrator, is not involved in a scheme we foresee that it would be difficult for the government to try and enforce scheme trustees to integrate with a dashboard, as the level of technicality involved could make it very difficult. EPPs are traditionally operated through an insurance company and invested in insurance company funds, so there should not be such an issue of integration. V. Are there other categories of pension scheme that should be made exempt, and if so, why? As mentioned in all sections above, bespoke SIPPs would come across challenges for onboarding and careful considerations need to be made. Page 3 of 7

4 Implementing dashboards VI. Our expectation is that schemes such as Master Trusts will be able to supply data from 2019/20. Is this achievable? Are other scheme types in a position to supply data in this timeframe? Unfortunately we do not feel sufficiently able to participate in answering the first part of this question, as SIPPs and SSASs are not subject to Master Trusts regulations. We would envisage that firms regulated under MiFID II, personal pension plans under insurance company providers and auto enrolment schemes however might be in a better position to start onboarding within a 12 to 24 month period. We are disappointed that one of the starting points seems to be that certain schemes, such as public sector and defined benefit schemes, should be given an extension to joining the dashboard arrangements. We consider that their data and pension scheme information would be easier to be represented than for some defined contribution arrangements. We note the consultation states that we expect State Pension data to ultimately be part of the service. It will be disappointing for this data to not be available from outset as this could be a key measure in consumers understanding the need for pension saving. Referring consumers to a further resource for information is unlikely to be as successful. VII. Do you agree that 3-4 years from the introduction of the first public facing dashboards is a reasonable timeframe for the majority of eligible schemes to be supplying their data to dashboards? Yes, we agree that this would be a fair timeframe for the onboarding of eligible schemes. VIII. Are there certain types of information that should not be allowed to feature on dashboards in order to safeguard consumers? If so, why? Are there any other similar risks surrounding information or functionality that should be taken account of by government? If a dashboard has a minimum security approach, then as long as a user needs to enter personal identification details and/or code (the latter of which could be refreshed on a regular basis), then there doesn t seem to be any issues surrounding breaches of security. After all, secure websites are very common now and used in all aspects of every day living. The consultation paper mentions that it was suggested by some stakeholders that displaying Cash Equivalent Transfer Values (CETV) for Defined Benefit (DB) schemes might unduly encourage those members to seek to give up generous DB pension rights. Although our member firms do not in the main deal with these types of schemes, in the wider scheme of things it would not seem to be a high level concern for the pension scheme trustees to display this data. Where the CETV is over 30,000, a consumer must seek the advice of a regulated financial adviser that can assist with these types of transfers-out. The FCA have taken a pragmatic approach of recent times in ensuring that consumers funds are kept safe, in that firms agreeing to deal with transfers out are being constantly reviewed. Page 4 of 7

5 Within the next 3 to 4 years, when onboarding is proposing to be completed by, it might be the case that there is a very small accessible transfers market in any place. The consultation refers to converting defined contribution funds into a retirement income estimate. How this is achieved wasn t detailed but this has to be on a consistent basis across the industry and ideally provided within the dashboard as part of it s design and architecture. We await more information on this area. IX. Do you agree with a phased approach to building the dashboard service including, for example, that the project starts with a non-commercial dashboard and the service (information, functionality and multiple dashboards) is expanded over time? In order to gain consumer and industry buy in, it is sensible to use a phased approach and we would refer back to our earlier point on consumer research preferences. The testing against new legislation before implementation to ensure that the service is in line with consumer expectations is paramount. Legislation and dashboard designs can be altered if necessary without large scale negative impact to services already being accessed by consumers. From an industry perspective it would help firms ensure that data is highly cleansed before being available to integrate. Also from an industry perspective it would be beneficial if the government could communicate directly to consumers with the different types of schemes that will be phased in and at what stage. X. Do you agree that there should be only one Pension Finder Service? If not, how would you describe an alternative approach, what would be the benefits and risks of this model and how would any risks be mitigated? We are in agreement of consumers being able to access their pensions with ease and support the points put forward for a single Pension Finder Service operated on a non-profit basis and with strong governance. Protecting the consumer XI. Our assumption is that information and functionality will be covered by existing regulation. Do you agree and if not, what are the additional activities that are not covered? If the government is comfortable that existing regulation ensures consumers are protected and legislation can be amended where new activities identified are not covered by existing regulation, this seems to be covered within the content of the consultation paper. It is extremely important however to ensure that consumer s information is not placed in to an unregulated dashboard market. If the government envisages that the way to combat such issues are via a multiple dashboards option, then we would ask the government to consider a further industry consultation.. Page 5 of 7

6 Accessing dashboard services XII. Do people with protected characteristics, or any customers in vulnerable circumstances, have particular needs for accessing and using dashboard services that should be catered for? It would be useful for the government to signpost individuals whom do not have access to the internet to other places that have the facilities they need, such as the Citizen Advice Bureau or local libraries. This could include those with disabilities and those that are financially disadvantaged. Translation services might also need to be considered to be offered. We weren t however persuaded that all protected characteristics needed particular consideration in the development and design of the dashboard given it is meant to work and be available to all. Governance XIII. The department has proposed a governance structure which it believes will facilitate industry to develop and deliver a dashboard. Do you agree with this approach? If not, what, if anything, is missing or what workable alternative would you propose which meets the principles set out in this report? In order not to delay the implementation of dashboards, we agree with the proposed governance structure. As an industry trade body, we would be willing to represent our member firms at stakeholder meetings in relation to the delivery of the dashboards. Costs and funding XIV. What is the fairest way of ensuring that those organisations who stand to gain most from dashboard services pay and what is the best mechanism for achieving this? As mentioned previously in this response, it could be possible to set fees in line with the number of consumers that access the dashboard(s) through a pension provider. An annual fee based on statistics for the fiscal year end, or the fiscal year starting point would seem to be more sensible, as industry reporting is in the main tied to fiscal years. Ultimately we must ensure that good consumer outcomes are considered at each point in the design process. General XV. Do you have any other comments on the proposed delivery model and consumer offer? No further comments. Page 6 of 7

7 Distribution This is a public document available on the AMPS website: Author Sarah Hawkins, AMPS Technical Sub-Committee Chair, c/o Punter Southall SIPP, The Capital Building, St Andrew Square, Edinburgh, EH2 3AF. sarah.hawkins@puntersouthallsipp.com Dated January 2019 Page 7 of 7