My Lords, the purpose of Amendment 39 is to contain the delegated powers in the Bill so that they do not provide the power to authorise commercial dashboards to engage in transactional activities. Any authorisation regime to permit transactions should be addressed in a future Bill.
In a previous contribution, I sought to set out the policy still to be settled when the dashboard is focused on enabling individuals to view their pensions information in one place. When functionality is extended to the ability to transact on a commercial dashboard, the challenges and potential risks are even greater; there are multiple ways in which detriment to savers can occur. We should again remind ourselves that the dashboard project can extend to the whole of the UK pension system—public and private—embracing many millions of people. Allowing transactions over dashboards needs separate and clear consideration. It cannot be implicitly tucked into the delegated powers in this Bill.
Issues of private and public good will be impacted by whether the dashboard is fit for purpose when it comes to transactions: private good at the individual level and public good at the whole pension system level. I have yet to see the behavioural outcomes strategy associated with the dashboard. I assume the Government are not agnostic on the matter, given that the state supports the long-term saving system with some £45 billion of tax relief, so they will have a direct interest in knowing that the outcomes are good.
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The delegated powers in this Bill are pretty open-ended, but Parliament needs to be satisfied that as the dashboard transitions, adding more functionality, the controls and supports are in place for good consumer outcomes
to be achieved, and that the aggregate outcome of the decisions made by individuals as a result of the dashboard service makes a positive contribution to retirement outcomes for the public good in the UK. The evolution of the dashboard beyond the initial mandatory find, release and view of information should come back to the Houses of Parliament for proper scrutiny.
The long-term saving market is particularly susceptible to consumer detriment, and the evidence and informed opinion, including all relevant regulators, is that the consumer demand side is weak and increasingly focus has to be on provider supply-side controls to protect consumer interests. I shall illustrate the spirit of that comment. Commercial dashboards would make it much easier for firms who have attractive front-end offerings to capture consumer assets through encouraging easy consolidation of pension pots via mobile apps, but sometimes the business models of those firms mean charges on those assets will be considerably higher.
The Bill may set a framework for deciding what information should be on a dashboard, but the presentation of that information is hugely important. For example, some dashboard providers could have an incentive to present information on certain pension schemes more favourably, either because the dashboard provider is also a pension provider or because their business model is based on helping some pension schemes to attract customers. Value-for-money assessments are as variable as the criteria against which assessments are made, and the weightings given to each criterion making comparisons are extremely difficult. As a trustee, I am directly involved in trying to deliver value-for-money assessments under our regulatory obligations, so I feel confident in making that assertion.
Dashboards are not a silver bullet for removing the risk of consumer detriment. The evidence demonstrates that most individuals will not proactively engage with their pensions until they have to. When they do, they can be price insensitive and vulnerable to judgments detrimental to retirement incomes. Noble Lords do not need to take it from me. There is a heavy weight of evidence from regulators such as the FCA which supports that. In fact, it is evidence that the FCA contributed to with its report on the drawdown market.
The regulation of consumers granting delegated access through the dashboard will need careful consideration, because any exposure through a weak delegated access system could be much greater when all the information is available at one point. It is important because the current body of evidence reveals that consumer behavioural biases have more impact on financial capability than lack of knowledge and information. They take what the FCA describes as the path of least resistance, even in the face of information available to them.
The provision of dashboards may be a regulated activity, and therefore the FCA’s FiSMA powers come into play. However, there is the issue of whether the FCA will require additional powers to impose supply-side controls in order to protect consumer interests, particularly given that we do not yet know what government policy will be on many issues, including the pricing model for commercial providers, which the noble Lord, Lord Young, referred to.
The FCA conduct rules have not prevented repeated failures or scandals. The failure of support to the Port Talbot steelworkers is just a recent example on the continuum stretching from the personal pension mis-selling scandal of the late 1980s. Any brief reading of the FCA reports on the functioning of the financial advice market to support pension savers does not leave one with a high level of confidence.
However, clarity on the model of liability, including that carried by the state which is mandating the release of data, will be essential if transactions are allowed over the dashboard. The FCA will not be the only regulator with an interest. Protecting the data and its holding, access and use in a transactional model of dashboards will be of major importance, given the scale of harm to consumers that could occur if it is not done properly. Parliament should have the opportunity to scrutinise to satisfy itself about what is being proposed.
The dashboard, properly implemented, can empower and inform individuals and contribute to them making better decisions. However, the long-term savings sector as a whole is not that far up the digitalisation curve, the good examples excepted, and it should harness the positives of financial technology to the benefit of customers. But the scale of the project and the consolidation of an individual’s data in one space can also enhance the scale and consequences of consumer detriment if the risks are not properly addressed and a high level of confidence provided.
This amendment is not forcing a debate about whether transactions should or should not be allowed over the dashboard. It seeks to limit the delegated powers in the Bill so that authority cannot be given to allow transactions across the dashboard service. Transactional activity is so significant that it should be approved by Parliament, through another Bill, in receipt of reports as to why the Government have a level of confidence that transactional activity could now be added to the functionality on the dashboard.
I reiterate: the dashboard project potentially can extend to the whole UK workplace pension system, embracing many millions of people. The impact on public good outcomes is in danger of being lost in the debate. Parliament has a right, and indeed the responsibility, to put them centre stage.