The question of who should pay for the pensions dashboard deserves more debating.
There’s been much debate about which technology should be used for the pension dashboard but rather less about who is going to pay for it. It’s generally accepted that the pension dashboard would be a useful tool (although perhaps not quite the panacea that some claim) and HMT have committed to get the pension industry to deliver it. The technical architecture has been defined and the ABI on behalf of HMT have appointed 6 technology providers who are now busy building a prototype system. And yet it’s still not clear who will foot the bill for the real thing.
So who should pay? Here are the options:
The customer. No-one thinks this is a good idea. Whilst it’s possible that some dashboard services may include some interesting extras that might justify a fee, it’s universally agreed that a basic dashboard needs to be free for users if we are to encourage the kind of engagement that’s needed.
Pension providers. It wouldn’t be the first time that providers were asked to shell out for a new government initiative and the news that 17 pension companies are paying £50K each just for the prototype suggests that many are thinking along these lines again. Whatever the outcome of the debate it’s likely that providers will have some costs to modify their own systems but in an environment of increasing focus on pension fees it doesn’t seem a good idea to impose the full cost of the dashboard on long suffering schemes and their members.
Dashboard service providers. It’s now accepted that there will be multiple dashboard services rather than one government dashboard as originally proposed (thank goodness!). A number of pension providers and other organisations have expressed an interest in providing a dashboard service as part of their offering to clients. It could be argued that the dashboard service providers have most to benefit and should therefore pay the lion’s share of the costs.
The government or regulator. I do hope it doesn’t come to this. Whether it’s funded by a new levy on pension schemes or some other measure, a central committee tasked with spending other people’s money on a big IT project rarely results in good value for anybody.
Our view is that everyone should be responsible for their own costs. Pension providers will need to cover the cost of opening up their systems to requests from dashboards. Similarly, dashboard service providers should pay for their own chosen dashboard technology and any agreed security and communication mechanisms on which it depends. With each party having control over their own costs there’s a much better chance of a cost effective outcome.
But the preference of some pension dashboard project members for a centralised ‘pension finder service’ could shove a stick in the spokes of this approach. A centralised system with a monopoly position must be funded centrally or given the power to impose its fees on all parties. It’s likely that HMT will need to mandate that all pension providers support the dashboard to ensure adequate coverage and it will be a bitter pill for the industry if this comes hand in hand with the imposition of unconstrained costs.
The technology for the dashboard is easy. And whatever we end up using will be superseded by something better within a few years anyway. But the commercial model that we choose will be much more difficult to shift once it’s established. So we mustn’t allow the commercial debate, however tricky it might be, to get lost in the technology noise.