My Lords, I shall speak to Amendments 37, 47, 48, 60 and 61. Amendments 37, 47 and 60 place in the Bill that there can and will be a
publicly owned pensions dashboard. The Minister may give ministerial assurances that it is intended that there will be a public dashboard; unfortunately, ministerial Statements have currency only until the next occupant. There is no requirement in this Bill as drafted that would require a future Secretary of State to make such a provision.
The amendments require that the dashboard ecosystem will include a publicly owned dashboard. The Government’s current policy,
“supports the coordination of an industry-led dashboard”—
leading—
“to the creation of a dashboard service designed, developed and owned by industry”.
The whole of the UK’s second-tier pension system will be mandated to participate in dashboards owned in the industry, giving rise to major public good considerations, yet nowhere in that wording is there a requirement to set up a publicly owned dashboard, nor is there one in the Bill.
The DWP feasibility study launched at the end of 2018 set out a clear direction of travel towards a single non-commercial dashboard before moving towards multiple dashboards. By April 2019, in responding to the consultation on their study, the Government had shifted their view to commencing with the simultaneous testing of commercial dashboards. Of the 125 replies to the consultation, 15 were from individual citizens and according to my calculation, nearly 60% were from financial service providers and associated trade bodies and six were from consumer bodies. By late 2019, in a previous version of this Bill, and in this Bill and its impact assessment for this version, commitment to a publicly owned dashboard has faded further.
Amendments 48 and 61 do not prevent commercial dashboards being authorised. They seek to ensure that the Government secure a level of confidence in operational delivery, security, consumer protection and insights into customer behaviour by commencing with a publicly owned pension dashboard for at least a year, and that the Secretary of State should lay before each House of Parliament a review of that service before commercial dashboards enter the market. A year is not a long time, given the scale of the consumer interest. If the Secretary of State believes that there is good reason for taking longer than a year, then my noble friend Lady Sherlock and I will be guilty only of prescience.
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Part 4, together with Schedule 9, grants significant regulation-making powers. As the Constitution Committee, of which I am a member, observes:
“These powers are skeletal as the scheme has not yet been developed ... There is a need for some of these powers in order to commence the work on pensions dashboards … the rest of the powers could have been omitted until the policy had been prepared and sample regulations produced for consideration as part of a future bill.”
The committee, while recognising that pension issues can be complex, concludes that,
“complexity is not an excuse for taking powers in lieu of policy development.”
Policy and key decisions have not been settled on some fundamental issues. I may not go as far as the observation of the noble Baroness, Lady Noakes, at Second Reading, who said:
“I have to say that this is at best a half-baked policy. We have no idea exactly how this will work.”—Official Report, 28/1/20; col. 1382.]
I do not go that far, but I fundamentally believe that the project calls for some effective risk controls, hence the call for a first run of the service to be through a publicly controlled dashboard, followed by a report to Parliament.
Building a pensions dashboard service has complexities. Here is just a short list, by way of illustration, of some of the matters not yet resolved or settled. Different parts of the infrastructure will be owned by different people; what are the implications? Liability can occur at different points in the dashboard service, involving different parties, but we do not know what the liability model will be. A matter of importance to trustees is releasing their data and consumers seeking redress on detriment. The proposition as to the presentation of data is not settled. We have not seen the data-sharing risks impact assessment referred to in this Bill’s impact assessment. We do not know to whom or to what body the Secretary of State will delegate powers to set standards and how those bodies will be publicly accountable, an issue which the Constitution Committee highlights. How will the risk framework for the dashboard service align with that applied to pension schemes on scams? What will be the charging model for accessing dashboard services? When will delegated access to an individual’s data be allowed? That is a list not of criticisms but of necessary work in progress. Such unresolved matters require a check. Without it, scrutiny by Parliament is inhibited and the public interest is not well served.
The long-term savings market is particularly vulnerable to consumer detriment because of asymmetry of knowledge and understanding between the consumer and the provider, customer behavioural biases, the complexity of products and the irreversible nature of many pension decisions. There is a plethora of reports and cases from the regulators—the FCA, the CMA, TPR and the OFT—that confirm this. Their reports opine that competition alone cannot correct it. The dashboard will not mitigate all these drivers of consumer detriment, but there are multiple ways that functionality in commercial dashboards could create detriment if not properly introduced.
There are those who argue that the complexities are overconsidered and that pensions dashboards can follow in the slipstream of open banking. Exposing the weaknesses in that argument was done comprehensively by the DWP in its dashboard feasibility study—my compliments to the drafter. It set out how the open banking and pensions dashboard projects differ. To highlight just some of those differences, open banking is intended to create better consumer outcomes through competition in an area where consumers already know what they have and where. Pensions dashboards are intended to increase awareness and understanding in an area where many people do not know how much they have saved and with which providers. The architectural solutions for each are different. Open banking allows
consumers to share their banking data with an authorised third party because customers know who they bank with and the digital architecture does not include a finding service.
In pensions, a finder service is required precisely to reconnect people with their savings or to keep track of multiple pots. Open banking customers authorise the service provider to access their data through direct authorisation via their bank account. That is not possible in pensions: most schemes do not have online consumer-facing platforms which allow direct authorisation. The dashboard model would have to support the guidance process through delegated access —an issue of some major significance—which open banking does not support.
The Government conclude that the architectural solutions are not the same and that key differences in objectives et cetera and their legislative and funding bases mean the open banking entity is not a viable option. The solution that is right for dashboards has to be found within the dashboard system itself. I am not alone in my view that the dashboard service should commence with a public dashboard. I will name a few of my—if I may presume to call them such—allies. NEST, with some 8 million members and growing, in its response to the government consultation, argued that,
“the Government’s focus should be on the creation of a single non-commercial public dashboard, with strong governance and consumer protections applied.”
The People’s Pension—a large not-for-profit master trust with more than 5 million members—in its publication Delivering Pensions Dashboards in the Public Interest supported a single non-commercial dashboard before moving towards multiple dashboards as necessary for the public interest. The Pensions and Lifetime Savings Association, much quoted by the Minister at Second Reading in defence of the Government’s position on many things, takes the view that the Government should ensure that they begin with the first dashboard with a single, non-commercial dashboard to ensure that the level and quality of customer protection is fit for purpose. Which? in its briefing states:
“The Pension Schemes Bill should enable the best possible dashboards to be created in the shortest possible time, starting with a Government-backed pensions dashboard”.
The long-term savings sector needs to harness the consumer positives which financial technology can deliver. It is behind the curve. The pensions dashboard has the potential to enhance private and public good if it is implemented well. The aspiration may be to improve engagement and decision-making and to resolve the problem of small pots, but we need to understand how the dashboard is driving behaviours, including any unintended consequences because the weight of current evidence—and it is heavy—is that in a market vulnerable to consumer detriment, individuals reveal powerful behavioural biases, and even the financially capable can make irrational and sub-optimal decisions.
Once the dashboard architecture is built, it should be tested exclusively as a single, non-commercial dashboard. This amendment recognises the complexities, the risks to be addressed, the choices still to be made and the extent of the delegated powers. It seeks to commence with a public dashboard service and that
the Secretary of State lays a review of the structure and effectiveness of that service before each House of Parliament prior to commercial dashboards being authorised.
These amendments are not an argument against commercial dashboards. They are saying, “Get it right; get a level of confidence before you put 25 million people’s data out into a network of commercial services.” It is not only the private interest of the individual customer. If you are putting the whole of the second-tier pension system in the UK into the dashboard ecosystem there are huge issues of public interest and public good. I am not arguing against the dashboard or against harnessing the benefits of financial technology. I am saying that the challenges and the risks are so great, so what is wrong with trialling it through a public dashboard for a year and presenting it to Parliament? If the Secretary of State is confident, the Government go ahead; if not, and they need more time, we will not have done anything wrong in this amendment. I beg to move.