HM Treasury has challenged the pensions industry to create a pension dashboard where consumers can see the details of all of their pensions in one place. A recent OIX research paper (Creating a Pensions Dashboard, Pensions Finder Alpha White Paper, Open Identity Exchange, May 2016) recommends the development of a central system to support the dashboard (with a possible future option of presenting that dashboard on the website of many organisations).
However, this seems to be at odds with the themes of consumer choice, competition and innovation embraced by other recent market developments.
For instance, the upcoming General Data Protection Regulation (GDPR) will allow consumers to ask any organisation to supply their personal data in electronic format to any authorised third party. With this in mind, the Open Banking Working Group (OBWG) has been established by HMT to open up the personal data held by banks to allow technology services companies to offer consumers innovative services based on that data.
There is now growing support for a pension dashboard approach that is more aligned with the work of the GDPR and OBWG and also the burgeoning UK fintech sector where innovation and competition are a central theme. This is the open standards or federated model where multiple interoperable systems suppliers compete to provide elements of the dashboard infrastructure.
Whilst at first glance a centralised system might seem the most straightforward approach to creating a pension dashboard, the challenges of procuring, funding and governing a central system and the constraints on competition and innovation are considerable drawbacks.
In contrast, a federated model creates an environment with multiple interoperable technology suppliers that encourages competition and innovation. Consumers will have a choice of services and dashboard providers are free to create more compelling services.
The federated model does not require central funding for technology and avoids the need for a monopoly technology supplier. The governance role is limited to setting technical standards, and service obligations. Success will require cross industry collaboration and government support. No one part of the industry should control the dashboard - the past shows that monopoly services are easy to create but difficult to break up and the industry should resist any such moves. However, the industry has successfully collaborated on similar issues in the past and can do so again.