Pension consolidators who set up their own dashboards will be in prime position to benefit from the anticipated ‘dash for DC cash’ according to LCP partner Steve Webb.
Webb, who is a former pensions minister, says that rules, which the FCA is currently consulting on, look set to give a huge advantage to those consolidators who set up their own dashboards.
On key feature of pensions dashboards will be the ability of users to ‘export’ their data. Although dashboard providers may not offer this facility, it seems highly likely that most will offer users the ability to download their own data and also export it to the provider’s own site.
The FCA consultation raises the aspect of potential risks of doing this, but has also pointed out there could be problems if users are not able to export their own data. This includes the risk that people use ‘DIY’ methods, such as taking screen captures of their data and then sharing it in a much less secure and less controlled way.
However, the FCA rules propose that users will only be able to export this data to themselves, or export it to the dashboard provider, which will include firms within the same group with permission to give investment advice.
FCA say that one advantage of this will be to allow the data be used to ‘pre-populate’ retirement modelling tools, helping savers to understand their options better.
Webb says that given the large number of fragmented pension pots, it is expected that one consequence of the launch of pensions dashboards is that individuals will be prompted to consolidate their DC pensions with a single provider.
But he adds that if the only direct way in which consumer data can be exported to a provider is if they operate a pensions dashboard, this will put such providers at a head start when it comes to ‘harvesting’ DC pots.
Individual users will, of course, have the option of logging on to a dashboard, exporting their data to themselves and then uploading it to a third party site (such as another DC consolidator). However, this will be a much more involved process than doing it directly from the dashboard, especially one that links directly to tools which have been ‘pre-populated’ with member data.
The FCA is currently consulting on the regulatory framework for what it calls ‘Pensions Dashboard Service Firms’ – the companies who will operate pensions dashboards. In the pilot phase the dashboards programme has announced three trial providers – an insurer (Aviva), an open banking platform (Bud) and an open data fintech (Moneyhub) – but it is expected that a wide range of market participants will choose to offer a pensions dashboard.
Webb says: “When pensions dashboards become available to the public it seems highly likely that this will drive member consolidation of their DC pensions with a single provider.
“If users of a dashboard can press a button and export their data into attractive tools, offered by the dashboard provider, this will hook them in to engaging with that provider and greatly increase the chance that any DC consolidation is to that provider. This could put dashboard providers in prime position compared with other consolidators who would have to get users to download data – possibly from a rival’s dashboard – and then re-upload it to a different site.
“We are very likely to see a ‘dash for DC cash’ when dashboards go live, and the restrictions on data export mean providers who set up their own dashboard are likely to be the winners of that race”.
He adds that the FCA have indicated that the exported data should not include full customer reference numbers and should not be sufficient therefore to allow for immediate transactions. Nonetheless, a DC consolidator who has been supplied with a full list of a saver’s pensions will be extremely well placed to complete the process of pot consolidation