Hawkins: "Any buyer of such a critical service provider will need high levels of trust!"
Hitting staging timescales important and there is a need to work with fast implementers that can be trusted, writes Jonathan Hawkins.
The pensions dashboards' launch begins in stages from Spring 2023, less than eight months away. At first, only the largest schemes and their administrators will be onboarding, and private sector defined benefit does not start to stage until March 2024. These schemes and their administrators could be forgiven for thinking they have plenty of time. Indeed, research undertaken by Bravura, in partnership with Delta FS, has shown many are still in the scoping and planning stages. Several third-party administrators (TPAs) raised the point that their client bases tend to be medium- to small-sized schemes, and therefore they have more time to prepare.
While it's true there will be opportunities to learn from the first adopters, these smaller cohorts of schemes are known to have the most data issues and will all be competing for limited resources to get themselves ‘dashboards ready'. So, this line of thought could be a mistake.
At an operational level, both TPAs and in-house schemes are beginning to look at how their systems will be connecting to the pensions dashboards ecosystem. Bravura's research found most were looking to buy, rather than build an integrated service provider (ISP) solution. The key reasons driving this approach are the ISP's speed to market, security capabilities and cost effectiveness. In looking at ISP provision the ability to handle implementations in the necessary timeframes is vitally important. As well as connectivity, the ISP solution will also provide, and probably deliver, all the management information required to demonstrate regulatory compliance at a scheme level. Any buyer of such a critical service provider will need high levels of trust!
The demands on ISPs will be high and government recognises creating a solution will be challenging. It is an immature market which is ultimately unlikely to be crowded. Those building credible solutions will have demonstrable scale, resources and financial backing. It is only these qualities which will be able to deliver such a complex, flexible service in the short time available and build the trust needed in their customers. ISPs will also need to demonstrate their operational and intellectual capabilities, because it's highly likely they will need to guide their less sophisticated buyers on their dashboards' journeys.
Until very recently, one of the less appreciated aspects of pensions dashboards is the point at which the British public will be made aware of the service. If pensions dashboards are exposed too early and the user experience is poor, usage could plummet meaning the project could fail to achieve its objective of connecting savers with their pensions. This is how we arrived at the dashboards available point (DAP). The DAP will not happen until specific criteria are met, possibly starting with ‘most' people able to see ‘most' of their pensions. Before DAP, dashboards remains in public beta. But even then, each time a user authorises the Pension Tracing Service to check for their pension, every scheme will be pinged - that's potentially thousands of pings a minute, even under test conditions. Here's where ISP solutions can hold data securely on schemes and administrators' behalf, acting as a shield and protecting their administration systems from exposure.
The notice period industry will get for the DAP is the subject of a current consultation. This means for some schemes, the weeks and months after staging could still be comparatively light touch. However, no one should be lulled into a false sense of security. There will be an awareness campaign and this could trigger an unprecedented wave of direct engagement from scheme members to their administrators. This is not just a data issue, with ‘possible' matches being directed to their scheme administrator.
All international experience shows first users of any dashboard are the 50+ age groups. It is feasible once they have seen the estimated value data shown on their dashboard, they will contact their administrator for accurate quotes. The more accurate and useful the industry can make the value data the more they can protect their operating models.
All established international pensions dashboards have been through more than one iteration post launch as they operated in their live environments. Change is almost a certainty for the UK. Administrators are already investing millions in technology to support high quality business-as-usual administration. Ensuring pensions dashboards' connectivity remains robust and futureproof needs a new and significant level of investment, as well as a different way of working.
Specialist ISPs are looking to deploy modular applications which have increased scalability and resilience with the capability for more agile updates and evolutions. By adopting a specialist service provider for their ISP, schemes and administrators can concentrate on the core business of administering and paying pensions.
Jonathan Hawkins is principal consultant and pensions specialist at Bravura
