Dashboards: DB schemes can use simplified revaluation for two years
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The government has published regulations for pensions dashboards, sticking with the three and 10-day timeline for returning requests, and limiting the use of ‘simplified’ revaluation for deferred defined benefit members to two years from a scheme’s connection date.
The government response on its pension dashboard consultation has been eagerly awaited by industry. Published on Thursday, the regulations outlined will govern, among others, what is needed for identifying a person, how quickly they will be able to see their data, and the timeline for schemes having to connect to the dashboards architecture.
Pensions minister Guy Opperman stressed that a pension was the most significant financial investment many people will make in their life.
“Clear pensions information at the touch of a button, including on the state pension, will ensure savers are better informed and more engaged, while helping people to plan effectively for retirement, as well as to find lost and forgotten pension pots,” he said.
Noting that initial testing of the dashboards architecture is already underway, the recently reinstated minister added: “My message to the trustees and managers of pension schemes of all types and sizes is simple: get data ready.”
Pension funds may use simplified approach for two years only
Some of the more contentious issues in the consultation by the Department for Work and Pensions have been on DB schemes, in particular, around the need to provide revaluation calculations for deferred members accessing the dashboards.
The department has now said that when it comes to showing the expected pension for deferred DB members “it is clear that there would not be a single approach that would completely satisfy all parties”.
DB revaluation is a complex calculation that involves many factors depending on the precise benefits a member is entitled to and is not carried out by most private sector schemes unless a member requests this information. To allow schemes to return such a value within a reasonable timeframe, the DWP had proposed a simplified approach, where schemes could project a pension using the rate of inflation for uprating. Some DB trustees were opposed to providing inaccurate information to members, however, and cost for any system changes was also a concern.
The government has now said it will allow a simplified approach to be used when calculating deferred members’ non-money purchase benefits, adding: “However, we will restrict the use of a simplified method to a limited period, that is within two years after the scheme’s connection date, which we believe should allow schemes sufficient time to improve their data and their systems.”
It added: “We have also sought to ensure that the simplified option is only used in cases where it would not be possible to provide a full calculation without incurring disproportionate costs or outside of a reasonable timescale; and where trustees or managers are content that the alternative accrued value would not be misleading as to the value of the benefits.”
Members must also be made aware that a simplified calculation has been used, it said.
The DWP is sticking with proposed response times of three days for defined contribution and 10 days for DB schemes where no value from the past year is available, but has extended the proposed 12 months to 13 months to allow for fluctuations in the sending of benefit statements.
DWP ‘would strongly encourage’ people to provide NINO
To search for information on the dashboards, members will have to provide their date of birth as a minimum, which will allow for calculations involving retirement date but also serve as an identifier, although it will not be displayed. The government has stopped short of using national insurance numbers as a stronger data item, "to ensure that the largest amount of people possible are able to make use of dashboards”. It added that it “would strongly encourage any individual who does have a national insurance number to provide it” but is not saying how it will provide encouragement.
Schemes with more than 1,000 members are due to connect to the digital architecture from April next year, with medium sized schemes following from October 2024. Small schemes with less than 100 members have no set connection date yet, but it is expected that this would be from 2026 onwards.
At what point the dashboards will be available to the public has also not been decided yet; the government is currently consulting on a proposal to give industry three months’ notice before they are mandated to ‘go live’ with their data.
