Dave Smith
Strategy Director at EQ
2022 should be the year to find your best gear. As if looking after your customers hasn’t been challenging enough in recent years, we are now firmly into the foothills of more extensive change.
The public sector has the immediate challenge of agreeing on remedies to the age discriminatory issues with their current CARE schemes. They will ensure redress for the past and build new schemes for the future. For many, the solutions introduce new dual record-keeping for the life of those members affected.
Alongside this, we still have the rolling waves of GMP equalisation where some solutions will deal with the issue once and for all. Whereas others may, you’ve guessed it, introduce new dual record-keeping for the lifetime of those members affected.
Elsewhere, aligned with the drive for making pensions more sustainable and stronger for its members, other changes are afoot.
2022 has already seen a private members’ bill to lower the age threshold for automatic enrolment. However, we are still coming to terms with the solutions for those lower-paid members missing out on tax incentives in net-pay schemes. And just this week, we saw the publishing of the promised bill on protecting small pots from the erosion of continued charges.
Meanwhile, industry groups continue their debates in the quest to herd those small pots together.
We also have the Pensions Minister announcing more requirements around ESG reporting and a push for schemes to better communicate how pensions are invested.
Avoiding Financial Disruption
In the broader financial services community, the FCA and PRA are leading the way to ensure companies have a complete understanding of their own practical sustainability. There is an increasing focus on operational resilience. There is the need to make sure the entire supply chain for every principal business process is well mapped and understood. By fully aligning all, this will support delivery to the end consumer in the event of business disruption in any link in that chain.
It’s not just movement in legislation and regulation. There are technology drivers for change too. Just as the Pensions Dashboards Programme (PDP) kicks into its build and test phase this year, we also have other technology initiatives that affect how we will do business safely in an online world.
Digital Identity is one of the non-pensions challenges the dashboards will be at the forefront of tackling. As the UK does not have a single, reliable, shareable unique identifier for each adult, a lot of work needs to go into the creation of trusted identity attributes. Here, the 'shareable' bit is critical; a security tool could not be reusable otherwise. The Department for Digital, Cultural, Media and Sport (DCMS) has been working with the private sector to build the 'UK Digital Identity and Attribute Trust Framework'.
We should also see the PDP itself as a digital enabler. The requirements for compliance with the forthcoming secondary legislation can either be a burden, or the foundations of a business case to bring your data and admin practices into the digital age.
Open Banking started the ball rolling by allowing consumers to see their data where they chose to. The PDP will be delivering the industry architecture to allow pensions data to be similarly shared, wherever the consumer chooses. Of course, the PDP has the added hurdle of producing the search function that banking did not need, along with the added latency of an industry that isn’t as digitally enabled as banking already was. However, what we see in front of us now is the plan to get to the base camp of what Open Pensions could be in the future, but we need to navigate those tricky foothills first.
We bemoan the volume of change all the time. But one thing does not change. Change affects people, processes and platforms. The common denominator of all three is data. The data you hold about your customers, the processes you use to keep data up to date, the processes you use to transform data into stories and benefits, the platform that enables you to connect, keep safe and, deliver your service.
So, whilst we consider new plans, predictions and resolutions, let me ask for a joint resolution from our industry. Let us resolve to consider this year as an opportunity, not a burden. Let us move forward together to not just think about our immediate compliance needs, but also put in place the operation and tooling for the future of an 'always-on' administration service. Not just the 'what now?' but the '…and what next'?
It’s time to find the right gear – there are hills ahead. Let’s not turn them into mountains. And maybe, just maybe, there are some downhills to come where we can enjoy the view.