Pension dashboard operators now require FCA authorisation
Operating a pensions dashboard is now officially regulated activity, after new regulations came into force on 11 March. These dashboards are secure digital interfaces that give consumers digital access to basic information about all pensions they own. In March, the Department for Work & Pensions (DWP) also published new guidance that sets out staggered deadlines for pension schemes and providers to connect their dashboards to the broader network, and therefore be ready to deal with pension holder requests for information.
The Money and Pensions Service will operate its own dashboard, but other pension organisations will need to host their own Pension Dashboard Service (PDS). Each PDS will be expected to meet certain requirements and will need to obtain authorisation and be regulated by the Financial Conduct Authority (FCA). If a PDS fails to meet the standards set by the Money and Pensions Service it could face deauthorisation, and it will be an offence for any PDS to operate without FCA authorisation.
At present, the deadline for all 3,000 pension providers and schemes to connect to the digital architecture has been set for 31 October 2026. However, larger schemes will need to begin connecting from April 2025, to ensure enough time for testing.
Commenting on the publication of the new timetable, Rocio Concha, who is the Director of Policy and Advocacy at Which said, “The Government and industry must now work together to introduce dashboards as soon as possible so savers can make more informed choices about their pensions.”
‘Small Pots Delivery Group’ formed
The DWP has established a small pots delivery group – including representatives from the FCA, The Pensions Regulator, the Pensions Administration Standards Association and the Pensions and Lifetime Savings Association. The group will also feature contributors from the Federation of Small Businesses, the Confederation of British Industry and Which, among others.
The group will look to offer recommendations on designing and implementing the ‘multiple default consolidators’ approach for small, deferred, Defined Contribution (DC) pension pots which was first introduced in the Government’s consultation response published in November 2023. The new approach is hoped to deliver a £700 benefit to the average saver at retirement.
Pensions Minister Paul Maynard said, “Deferred small pots are costly, inefficient, and hard to keep track of. This group will help in crafting a cost-effective and efficient system, ensuring better financial security and greater value for money for millions of savers.”
Pension auto-enrolment news
The DWP has also published its annual review of the earnings trigger and qualifying earnings band used for automatic enrolment (AE) for the coming tax year. The AE earnings threshold determines who is eligible to be automatically enrolled into a workplace pension by their employer, based on current earnings. The DWP reported that the trigger remains frozen at £10,000, the same threshold since 2014/2015. The earnings band on which minimum pension contributions are based has also been held at last year’s levels (£6,250 to £50,270), which is in line with the lower and upper earnings limits for National Insurance purposes.
However, while those thresholds were retained, two new extensions have been proposed, including abolishing the lower earnings limit for contributions and reducing the age at which workers first become eligible for AE – reducing it from 22 years of age to 18. A Private Members Bill for these two extensions received Royal Assent last year. The DWP's update noted that, ‘Government remains committed to this, subject to discussions with employers and other stakeholders on the right implementation approach and finding ways to make these changes affordable.’
Summary
Taken as a whole, these three updates on the roll-out timetable of the pensions dashboard, encouraging actions being taken on tackling issues with small pension pots, and efforts to expand and update AE eligibility criteria, are all welcome developments. Each demonstrates ambition, joined-up thinking, and a willingness to tackle some long-standing issues. At the same time, they also underline the commitment from Government and regulatory bodies to improve people’s access to pensions, make contributing to pensions more achievable and thereby ensuring better retirement outcomes for more of the UK population.