Pensions schemes will face significant additional working costs reaching into the millions of pounds to prepare their data for the pensions dashboard, according to Lane Clark & Peacock (LCP).
LCP partner and former pensions minister Sir Steve Webb said this remains a concern for both defined benefit (DB) and defined contribution (DC) schemes after the government’s latest response to its dashboard consultation, and despite assurances to the contrary.
“The government needs to come clean about what is involved,” he said. “If it really intends the dashboard simply to be a cut-and-paste from existing statements, then information on display will be utterly inconsistent between different pensions.”
The consultancy said the government should consider two options, the first being that data from schemes is simply cut-and-pasted with acknowledgement of the inconsistences. In this option, LCP found figures for two DB pensions for the same member could be side-by-side, but calculated on different definitions.
However, the government could require schemes to supply data against “new and standardised definitions”.
Even in this preferred scenario, Webb said the best-administered data will still be complicated by “non-standard” cases, such as pension sharing on divorce, savers with transfers in, and people working past pension age, all requiring manual calculations.
For schemes where data is less well-organised to begin with, the costs to present values on a new basis for all active and deferred members could be extortionate.
Webb said: “Schemes will have to do a huge amount of data manipulation to get data in a standardised format for the dashboard and the cost of this will be huge, especially where data is not currently organised.”
On the DC side, trust- and contact-based schemes are separated by rules set by the Department for Work and Pensions (DWP) and the Financial Conduct Authority respectively.
Webb said: “The pensions dashboard is a very important initiative [and] the government needs to be much clearer about which approach is planned so that schemes can prepare properly”.
This follows comments from pensions and financial inclusion minister Guy Opperman in March which promised “draconian penalties” for schemes who did not have their data properly organised in time.
The Pensions Dashboard Programme (PDP) is expected to publish its further thoughts on data standards later in the year after more industry engagement.
The DWP is then expected to publish regulations on dashboards once the Pension Schemes Bill has passed through the House of Commons.