Lords consideration of the Pensions Dashboards (Amendment) Regulations 2023 - Jul 12

Moved by

Viscount Younger of Leckie

That the Grand Committee do consider the Pensions Dashboards (Amendment) Regulations 2023.

Relevant document: 44th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument).

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)

My Lords, I am pleased to introduce this statutory instrument, which, subject to approval, will make amendments to the Pensions Dashboards Regulations 2022. The instrument removes the staging profile from the 2022 regulations and introduces a single connection deadline of 31 October 2026 for relevant occupational pension schemes to connect to pensions dashboards.

The successful introduction of automatic enrolment more than a decade ago, combined with a trend towards people working multiple jobs in their lifetime, has seen a substantial increase in smaller pension pots. Without intervention, the number of lost and forgotten pots will remain exactly that—lost and forgotten—and financial planning for retirement will become still more complex. Pensions dashboards will help hard-working savers to locate pension pots that they have accumulated over time, reconnecting them with lost and forgotten pension pots and supporting better planning for retirement. People will be able to view their various pensions, including their state pension, securely and all in one place online.

There can be no doubt that pensions dashboards have the potential to become a game-changer that will revolutionise the pensions landscape. The UK is not alone in realising the enormous potential that pensions dashboards bring. Countries such as Denmark, Israel and Australia have all established pensions dashboards as a feature of their financial landscape. However, the UK’s pensions industry is arguably unique by virtue of its scale and complexity. We should not underestimate the ambition and challenge of securely connecting thousands of schemes and of presenting data in a coherent manner, from state and private pensions, for the benefit of savers. We anticipate that, once all schemes in scope of the regulations are connected, the pension records of over 71 million memberships from relevant occupational pension schemes and providers of FCA-regulated entities will be accessible to people at the touch of a button, at a time of their choosing.

The reason for bringing forward these amendment regulations is that, at the end of last year, the Pensions Dashboards Programme, which is responsible for delivering the digital architecture that underpins pensions dashboards, informed my department that more time was required to complete the build of the digital architecture. The PDP faced several key issues: the technical solution has not been sufficiently tested and there is still work to do to finalise the necessary supporting documentation and to get the necessary systems in place to support the pensions industry with the connection process. It was concluded that more time was needed to successfully deliver dashboards and that a reset of the programme was required.

The Minister for Pensions subsequently issued a Written Statement in March 2023, announcing the delay and setting out that the Pensions Dashboards Programme would be reset to get it back on to a path for successful delivery. The decision to pause, review and reset the programme will provide it with the time to ensure complete delivery of the ecosystem and supporting documentation before industry begins to connect. So far, the reset has assessed the digital architecture and I am pleased to report that no fundamental issues have been identified. This has provided reassurance to the Government to move forward with amending the regulations.

The staging profile in Schedule 2 to the 2022 regulations set out the order in which different types of schemes, categorised by size and type, would connect to pensions dashboards. However, the 2022 regulations did not provide the flexibility necessary to deliver a programme of this magnitude—a digital undertaking that will enable users to search over 3,000 schemes to find their pensions.

This instrument curtails the period of uncertainty for the pensions industry. The staging profile in the 2022 regulations required the first schemes to connect at the end of August 2023. By laying these amendment regulations, we are seeking to avoid any perception that schemes would be in breach through no fault of their own. As mentioned, all schemes in scope will now be required to connect to dashboards by 31 October 2026 at the latest. The regulations will provide more flexibility to deliver pensions dashboards while retaining the broad framework of a phased approach to help to manage the flow of connections and maximise coverage as early as possible.

The Government will work with partners and the pensions industry on a connection timetable to be published in guidance. We expect that the connection timetable in guidance will prioritise large schemes with the greatest number of members. This will maximise the potential for savers to realise the benefits of dashboards as early as possible. The dashboards available point—the point at which dashboards will be available for widespread public use—could therefore happen before the October 2026 connection deadline in the regulations. Although the connection timetable set out in guidance will not be mandatory, there is a requirement for scheme trustees or managers to have regard to this guidance. Not doing so would be a breach of the regulations. The Financial Conduct Authority will ask its board to make corresponding deadline changes in the dashboard rules for FCA-regulated pension providers shortly after Parliament approves these amending regulations.

I will now explain what has not changed. Although the instrument amends the requirements on trustees or managers by removing Schedule 2, there are no other material changes to the regulations. All other requirements have been retained, including the requirements to be satisfied for qualifying pensions dashboard services, connection duties and requirements on “find” and “view”. Crucially, the requirement for the Secretary of State to provide six months’ notice ahead of the dashboards available point remains unchanged. The Government will continue to work with the industry on the matters that must be considered before dashboards are launched to the public.

The consumer is at the heart of all our endeavours. These relevant matters are important to ensure that pensions dashboards are launched to the public safely and securely, having been rigorously tested. Protecting the best interests of savers is the core principle behind dashboards and the Government remain firmly committed to ensuring that people’s data is accurate, simple to understand and, above all, secure. Dashboards will ensure that people always remain in control over who has access to their data, as existing legislation, including data protection duties, underpins the requirements that must be adhered to by pension providers, schemes and qualifying pensions dashboard services.

Accurate and high-quality data is essential to delivery and the success of pensions dashboards rests on the pensions industry’s ability to successfully match consumers to their information. The Government and the regulators have repeatedly advised the industry to get its data ready for dashboards. It should use the extra time to ensure that it can meet its dashboard obligations. Schemes and providers are already subject to existing statutory and other protections on data, including the accuracy principle under UK GDPR, which places a requirement on schemes to take all reasonable steps to erase or rectify inaccurate data without delay. It is crucial that dashboards give power to savers and not to scammers. Robust controls and standards will be built into the digital architecture to prevent potential scammers or fraudsters from gaining access to people’s information.

These amendment regulations will facilitate a collaborative approach to connection that delivers on our commitment to introduce pensions dashboards. Pensions dashboards have the potential to transform retirement planning for ever and these regulations are another step in the right direction. I therefore commend them to the Committee. I beg to move.

Lord Young of Cookham (Con)

I am most grateful to my noble friend for the clear exposition of this statutory instrument and for the very helpful meetings that he and his officials have held with noble Lords over the past few months. I am also grateful to him for the letter that he wrote to me following the last meeting.

Looking around, I see some aficionados from our earlier debates on the pensions dashboard. I was looking at a debate from 28 January 2020, when I said:

“Over the weekend, I logged on to the Pensions Dashboard Prototype Project, which I found informative, but right at the end it said: ‘The industry and government hope to have Pensions Dashboard services ready by 2019’”.

At that time, we were debating a consultation document and the response to it. Again, I quote:

“Reading the response to the consultation document, we are told: ‘Once the supporting infrastructure and consumer protections are in place, and data standards and security are assured, most pension schemes should be ready to provide consumer’s information to them within three to four years’”.—[Official Report, 28/1/20; col. 1373.]

That was in January 2020. My noble friend knows that this project has been dogged by uncertainty and delay.

I have a specific point to raise about the identification service. Consumers will obviously have to identify themselves before they can access the dashboard. The Government’s initial proposal was to use Verify, a system sponsored by the Government with ambitious targets to have 46 government services accessible by March 2018. Sadly, that project was not a success. The NAO said that

“it is difficult to conclude that successive decisions to continue with Verify have been sufficiently justified”,

and the Government withdrew support from Verify in 2020. The pensions dashboard has had to develop its own service in the meantime.

In my noble friend’s very helpful letter, he referred to the new government service, GOV.UK One Login. He said:

“The core of the system has been launched: its sign-in element, a web-based identity verification journey, and a fast-track identity checking app”

are up and running. I have actually connected to and logged into One Login, and am now registered.

In his letter to me, my noble friend went on to say:

“As you may recall, the PDP”—

pensions dashboard programme—

“has procured an interim identity service provider, whose contract runs until January 2024”.

At what point will the pensions dashboard transfer from this interim service? Will it transfer to the government-run One Login, which seems the obvious thing to do, assuming that it is as robust? By the time the system is launched in 2026 or earlier, will the interim service have been put to one side and will we all have moved over to One Login; or will the interim service still be the one that we have to use, for the next few years? I hope to hear that it will have transferred to One Login, so that we do not have to register twice—first with the interim one and then with One Login. That is my main point.

My final point is on the Secondary Legislation Scrutiny’s Committee report on this statutory instrument, published on 22 June, which I am sure my noble friend has seen. The committee raised two points in its conclusion, to which I am sure my noble friend will reply. In paragraph 27, it quoted its 16th report:

“We encourage the Government to take this opportunity to address the complexity and costs of the dashboard … by simplifying and standardising the system wherever possible”.

The committee confirmed that that remains its position in its latest report on this instrument. Finally, it said:

“We are disappointed to, once again, find our Report supplying basic information to the House that DWP should have published in the EM”—

the Explanatory Memorandum. I am sure my noble friend will respond to those points, in addition to my main point about the verification service.

4.30pm
Lord Vaux of Harrowden (CB)

My Lords, it is obviously deeply regrettable that the pensions dashboard has been delayed—again, I should probably say. If it is not ready, a delay to the connection is obviously necessary, so there is not an awful lot to be said about the regulations themselves. As we have just heard, the Explanatory Memorandum is less than fulsome on the reasons or the implications, as the Secondary Legislation Scrutiny Committee pointed out in its rather critical report, so I want to ask a few questions. I have not been able to attend some of the briefing sessions that the Minister has organised, so I apologise if I am covering what was said at some of those, but it might be worth having it on the record anyway.

What is the reason for the delay? The Explanatory Memorandum and the Minister talked about insufficient testing,

“more work … to set up adequate support for industry … and … to finalise … supporting guidance and standards”.

However, those are not reasons; they are not what has caused the delay. Delays of this nature are typically caused by inadequate scoping at the outset—we got it wrong at the beginning—by changes to the scope along the way, or by some combination of the two. Which is it? Who is responsible? What action has been taken to make those responsible for the delays accountable? If the team needs to be strengthened, has that happened?

The other possibility is simply that the dashboard was overcomplicated from the outset, which I think was what the Secondary Legislation Scrutiny Committee may have been alluding to. Are we sure that we are not gold-plating it? Are we reinventing the wheel here? For example, have we taken advantage of the experience of open banking? We could have piggybacked on that.

Is a third-party supplier involved? If so, who and what responsibility does it have for the delay? Are there penalty clauses in the contract? If a third-party supplier is not involved, is it sensible for us to try to do a project of this size entirely in-house?

The EM is very quiet on the cost implications. What was the forecast development cost? I am talking about not the overall costs of the dashboard over 10 years but the development cost. What is it now? How much has it cost to date? How much is still to be spent? Who will cover any increase—industry, government, taxpayer? How will that work?

When large software projects of this nature go wrong, they tend to keep going wrong. I come from a software world, so I have experience here. What comfort can the Minister provide that this really will be the final delay and that we are now properly on top of the project?

At the time of the Act that enabled the dashboard, we had a lot of debate about the creation of other, privately created dashboards, and there was a lot of agreement around the Room at the time that the Money and Pensions Service dashboard should be the first to be run. I agreed with that but, given the delays, perhaps we want to think about it again. What other dashboards is the Minister aware of being developed? Are any at a sufficient stage of development that it might be quicker or cheaper for the Money and Pensions Service to consider partnering with them?

Finally, can the Minister provide any forecast of when the dashboard will become available to the public?

Baroness Drake (Lab)

I thank the Minister for so clearly setting out the purpose of the regulations. I enjoyed the reference of the noble Lord, Lord Young, to his previous contribution in the debate on this issue, which was well made. My position is that it is not disappointing that the Government’s enthusiasm for such an early launch has been tempered; I always considered that it would be a very complex project and I am delighted that there is now a much greater focus on the complexities and ensuring what is delivered. I never really wanted it delivered two years ago because I did not think that it would be well delivered then. It needs to be well delivered, because of the scale that it covers.

These regulations replace the pension schemes staging profile, staging deadlines and connection window with a single common deadline for connection of 31 October 2026. I want to reflect on the guidance to schemes on a new connection staging timetable.

The DWP’s description of the purpose of that guidance has varied according to which document is read—there is not an absolute consistency. The documentation ranges between encouraging schemes to meet the new timetable to threats of a breach of the regulations if they do not, and “having regard to” the guidance is a concept that is a little unclear. Can the Minister clarify what exactly is the status of that guidance and when a breach—and a breach of what in regulation terms—would be triggered?

I will move on to an issue that we probably have not debated a great deal in previous discussions of the dashboard. The Explanatory Memorandum refers to the monitoring and review of this legislation, saying that the approach to be adopted is

“to put in place a multi-strand evaluation strategy, the details of which are being explored”.

This strategy will

“ensure the critical success factors can be successfully tested with learning helping to further develop dashboards over time”.

The plans include research into dashboard usage, outcomes from that usage and information provided by providers. However, I cannot see any reference to key pensions public policy outcomes in those critical success factors. I did not see them when the previous regulations came with the Explanatory Memorandum and I cannot see them now.

To take it at its most basic, if, for example, as a result of dashboard usage, greater numbers of people took out more of their pension savings in their 50s or early 60s, is that a success because they have engaged, or undesirable because more people will have a lower income when they get to state retirement age? We have to be very clear what are the public policy aspirations we are seeking from that greater usage. Clearly, it is not set out, as far as I can see, in the critical success factors and the multistranded evaluation strategy—although I recognise that that is work in progress. Will any of those critical success factors identified in the Explanatory Memorandum be benchmarked against desired public policy outcomes over the long term?

Staying with that concept, what long term do we want as the outcome—not only from dashboards but a whole range of other things, although dashboards are before us today? Yesterday we saw eight papers on pensions, including analysis, consultations and consultation responses, all published in one go. I cannot let that moment pass without asking the simple question of the Minister: was any consideration given to how those eight papers and sets of proposals would impact on the multistrand evaluation strategy for the dashboard? I appreciate that the Minister may not be able to answer that today but it is an important question that needs answering.

For me, the decision by the department and the FCA to proceed with a gross investment performance metric in the proposed VFM framework, as announced yesterday, rather than net of all costs and charges, together with the continued dithering by the FCA over the transparency of costs and charges value reporting in decumulation products, is a backward step which does not resonate with the pension savers’ interest and informed decision-making. That was a deeply disappointing element of that VFM framework to read. We know from the FCA’s own findings that a wide range of charges are applied in the decumulation market, which should be rigorously assessed in a joint FCA/DWP/VFM framework. That has just been sidestepped.

Yesterday, the Chancellor referred positively to the Australian supers, but I point out that they have a tough regulatory requirement to report investment returns net of fees. If the Government are going to promote private market investment, where charges are higher, transparency of returns net of fees is essential if the saver is not to end up paying back the excess returns to the industry. The link to the evaluation strategy and the dashboard is: what information will be provided, what influences on behaviour are we expecting and how will that produce better outcomes? I must admit that, when I read that VFM framework, I thought it disappointing and rather contradicted the idea that members using the dashboard will make more informed decisions. I did not want the moment to pass without making that point.

Baroness Altmann (Con)

My Lords, I, too, thank my noble friend for his clear exposition of the regulations. I am very supportive of them and I think they have general support around the Committee. Indeed, they are pretty essential, as my noble friend described. If we do not pass them, there is a danger that schemes currently required to load data to the dashboard by the end of August will be in breach, and there will be nothing they can do.

Replacing the statutory staging timetable with a single end date of October 2026 is understandable. It is also welcome that the reference date for the dashboard requirements of pension schemes is being moved to 2023-24 so that it can include some of the newer pension schemes, which will then have to go on to the dashboard. However, I would be grateful if my noble friend could help me with a few questions. It is fine if he would like to write to me; I do not expect him necessarily to have all the answers, although he may not be surprised by the questions.

My first question relates to the Government’s intention to publish a new timetable in the form of guidance. When will it be published? Also, my noble friend said that it will not be mandatory, although trustees must, as the noble Baroness, Lady Drake, said, have regard to the guidance and will get at least six months’ notice. What is the penalty for non-compliance with the guidance, if it is not mandatory? If it is struggling, a scheme may simply say, “We’re not going to do it because the amount of money we need to spend to get on the dashboard is not worth our while”. The customers and members of those organisations would then not benefit from the dashboard.

My second question relates to the vital issue of data accuracy, which is essential for dashboards. I hear what my noble friend said about accuracy requirements in the GDPR. Following our briefing meetings, I was grateful to him and his officials for a follow-up letter that clearly explained that the Pensions Regulator has set out in guidance expectations on data quality, record-keeping, measuring data once a year and trustees ensuring that processes and controls are in place so that data standards are of good quality. Master trusts are supposed to have processes for rectifying errors they have identified and then reconciling them. This is all in place and is most welcome, but I have to ask my noble friend: where does responsibility lie for checking the data, ensuring its accuracy and then correcting and reporting back that those data have been assessed and corrected? If that does not happen, on whom would penalties fall? To whom can members and the dashboard turn to ask, “Are you sure these data are correct?” Who is ultimately responsible for signing off on that or carrying responsibility for penalties if that does not happen?

I have another question, in the light of the comments from the noble Baroness, Lady Drake, about the number of releases we have just had from the DWP. I admire the work that has been done by the department—it has clearly been extremely busy—and a lot of it is really useful. However, how will the dashboard dovetail with the reforms proposed for small pots? The Government rightly want to help people—as is part of the intention of the dashboard—to merge pots and not leave small amounts of money in legacy schemes. What are the plans for integrating the dashboard rollout with the small pots reforms?

4.45pm

My next questions are about data security, which my noble friend Lord Young has already touched on. Can my noble friend the Minister explain what is happening around enhancing data security? We know that there have been problems, and there have been warnings about the problems that could arise from scammers and others being able to hack into the data on the dashboards.

I have two final questions. With this reset and reconsideration, will consideration be given to having uniform data standards so that all pension companies have to use a standardised system, as has happened in Australia? That could make an enormous difference to the ability to have all the data recorded in one place and updated regularly.

Will my noble friend comment, or perhaps write to us, on the status of the corrections made as part of the big exercise within the state pension system to identify and correct state pension entitlements, particularly of women? I know it is a significant exercise but any update would be welcome, as that needs to feed into the dashboard too.

Lord Palmer of Childs Hill (LD)

My Lords, I thank the Minister for bringing this statutory instrument to the Grand Committee. I have read the November debate and I look forward to a further detailed disposition from the noble Baroness, Lady Sherlock, with her usual forensic care. I will therefore not go into great detail; I am glad she will be winding up.

Can the Minister give me some reassurance? Compared to many others, I am coming new to this brief. Having looked through the regulations I see that there are no longer any binding interim dates, just one big deadline in 2026. Does the Minister not see how hard it will be to get busy pension schemes—commercial pension schemes—to prioritise this over their other day-to-day work? Other noble Lords have made the point about data being ready for dashboards. How much time will these pension schemes give to this, given that there are no interim dates and just one big date in 2026?

It seems to me that the issue is deadlines, and there is a need for the Government and pension schemes to nudge people to make sure that all details are up to date on the various pots so that they can pull that through to the dashboard when it is launched.

In a debate on 8 June, the Government elaborated on the need for dashboards to change the way people plan for retirement, and the Minister said that more time was needed to deliver this complex build. Paragraph 7.4 of the Explanatory Memorandum includes explanations. I have never seen so many explanations for why something has not happened:

“The technical solution has not been sufficiently tested, more work is needed to set up adequate support for industry with their connection journey and there is still work to do to finalise the necessary supporting guidance and standards”,

and so on. It is the biggest list of excuses for delay that I have come across for some time.

Other noble Lords have mentioned guidance in passing. Does the Minister believe that guidance will be sufficient to concentrate minds on the issue? I am not sure that guidance will be sufficient in many cases.

There are some small points, but I am not sure how they are addressed. I may have missed that somewhere, so I hope the Minister can provide me with an answer. For instance, how are widows’ and widowers’ rights to the pensions of their husband, wife or partner being dealt with? I had a similar case: I have a modest council pension pot and I asked what happens when I die; does my wife receive a contribution? That was six months ago and I still have not had a reply, and it is being dealt with by one of the very large pension funds. I would like some reassurance that these dashboards are not going to make the situation even worse.

In theory, pensions mainly apply to older people, although people seem to take them much earlier nowadays. It worries me that the whole idea of the dashboard is based on a knowledge and working use of IT. It may surprise noble Lords to learn that a lot of people do not use IT; many people just use their mobile phones to make calls. The whole principle of the dashboard and the way in which people access information is based on being able to operate an IT system. I have doubts because, even if the people concerned are not old now, as they get older and less able, when they will really want to know, they will be fiddling around not knowing how to get into the dashboard. Will we end up with big companies such as Aviva taking over pension schemes? I have no problems with Aviva. It seems to have taken over an awful lot, although it does quite well, but I am worried that many of the smaller pension funds will opt out.

Page 2 of the valuable impact assessment that was produced gives three options: do nothing, an alternative to legislation, and—the preferred option—the Government legislating. After reading all this, I wondered whether the first option, to do nothing, might have been safer, but we have to move forward.

We need to be careful, but we must say when this will happen, and the guidance has to be accepted by the pension funds so that they know when to do something, rather than waiting until October 2026 and saying, “Gosh, we have to do this by tomorrow”. My first point was that we need some interim dates to focus minds on this issue otherwise, as we were here a year ago and were here before then, we will be here again with another list of excuses, as detailed on this document.

Baroness Sherlock (Lab)

My Lords, I thank the Minister for his introduction to these regulations and all noble Lords who have spoken. It is very nice to welcome the noble Lord, Lord Palmer, to the pensions dashboard crew; we look forward to having discussions with him on the later iterations of this project, which one sincerely hopes will not come to pass.

We have been very supportive of the pensions dashboard. Therefore, we agree with the noble Lord, Lord Vaux, that it is deeply regrettable that we are in this place and that the Pensions Dashboard Programme needed to be reset. I accept that my noble friend Lady Drake is right: if the digital architecture was not going to be ready to enable pension schemes to connect before the first deadline, which is the end of next month, it is clearly better to pause and get it right. After all, the dashboard service will enable access to trillions of pounds of assets and accrued benefits belonging to working people. It has to be secure as well as fit for purpose.

My noble friend Lady Drake is often a Cassandra on these matters; she sees these problems coming. My problem is not that the Government should pause and reset, if that is necessary; it is that they need to stop pretending that everything is fine, until the moment when it is suddenly not fine. That is a bit of a habit in government: “Is everything fine?” “Yes, yes, yes. Oh, no, it has all fallen apart, but will be fine again with a new deadline”. We somehow need to find a way of discussing things in politics that allows a grown-up approach to understanding when projects will be difficult. There is an overconfidence on the part of the Government such that, when everyone raises problems, Ministers are sent out with a brief that says, “No, it will all be fine; there is nothing to see here”, until it falls over.

I do not expect the Minister to solve that problem overnight, but I commend this to the Government as an opportunity to think again about how we handle big projects—and, in particular, how Parliament can have some accountability for them. An awful lot of money is at stake here—private, commercial and public. There ought to be some decent accountability over it.

Clearly, people such as my noble friend Lady Drake—indeed, many on these Benches—cautioned the Government that they were underestimating the complexity of delivering the dashboard and being overoptimistic about the speed, but we want a dashboard to work. I am with the noble Lords who are raising challenges about the reasons. We have had some helpful briefings, and some slightly less helpful official ministerial Statements, but the truth is that it is hard to know what exactly has gone wrong and why it was not picked up earlier.

The Minister told us the reason, saying

“the technical solution has not been sufficiently tested and there is still work to do to finalise the necessary supporting documentation and to get the necessary systems in place to support industry with the connection process”.

A cynic would say that, basically, that means that it was all fine apart from the technology, the paperwork and the systems. That is not an explanation of what went wrong. It is a little like when my washing machine breaks and a helpful friend will say, “What’s wrong with it?” and I reply, “It’s not working. It’s not washing clothes—I don’t know”. We need more than that. I know that the Minister is keen to have his officials talk to us, but there needs to be some process of public openness and accountability when things go wrong, so that there is the ability to hold to account and understand. However, here we are, with this reset.

As we have heard, the original timetable was hardwired into secondary legislation, hence the need for the instrument. As the Minister explained, it amends the 2022 regulations to remove the staging profile, staging deadlines and connection window and insert instead a common requirement for all schemes to connect to dashboards by 31 October 2026. The new approach is described like this in paragraph 11.1 of the Explanatory Memorandum:

“Through this instrument, the Department for Work and Pensions is retaining the policy of compulsory connection by a set date and intends to encourage a staged approach set out in guidance, rather than mandated in Regulations”.

Therefore, the answer to the noble Lord, Lord Palmer, is that there will be interim dates in the guidance, but they will be suggested interim dates. It is not yet quite clear what that will mean in practice. Trustees and managers will need to have regard to such guidance but as I understand it—the Minister can clarify it—that would not necessarily mean that they are obliged to comply with the suggested dates, or presumably they would be not suggested dates but mandated ones.

That raises some key questions. With a single compulsory connection deadline, is there not an obvious risk of a backlog of schemes still waiting to connect as we get close to 31 October 2026? What action will the DWP take if there is evidence of back-ending by schemes or of backlogs building up? That is not just our concern. Dr Yvonne Braun, a director of the Association of British Insurers, said:

“Our members have indicated they’re willing and able to continue to comply with a voluntary timetable, although it would have been our preference that these remained a regulatory requirement to prevent a last-minute rush of firms connecting to the system. We ask that government keeps this under review and considers making the staggered dates a regulatory requirement again if it should become clear that the wider industry is not taking the same approach”.

What is the Government’s response to that?

Although the timetable in the guidance will not be mandatory, we know that scheme trustees or managers must have regard to it, as not doing so would be a breach of the 2022 regulations. They will also be expected to demonstrate how they have had regard to it. However, as my noble friend Lady Drake said, the language of the Explanatory Memorandum is much more about encouragement. Paragraph 7.6 refers to MaPS and TPR communicating with

“trustees and managers of schemes in scope to encourage connection ahead of the single connection deadline, in line with the connection dates set out in guidance”.

It is not clear to me where the line lies between compulsory and voluntary when it comes to guidance. Can the Minister clarify that?

Can the Minister explain what “have regard to” means in practice? Is there an established meaning of this in law? It is a phrase that comes up, so can he help us on that? A crucial question is what would count as not having regard to the guidance. For example, suppose a scheme manager reads the guidance carefully and develops a plan to connect just in time for October 2026, and she is confident her scheme will be ready by then, does that count as having sufficient regard? Suppose lots of others do the same thing, and they all get to that point but cannot connect because there are too many of them and the system cannot manage it, are they in breach of the law? Have they failed then to have due regard to the guidance? What is their position?

5.00pm

We are told that guidance-based staging dates will be determined by the end of the year, I think it was said. This leaves a lot of uncertainty. I think I caught it correctly when the Minister said that this instrument curtails the period of uncertainty for schemes. However, I heard an interesting comment. Jon Pocock, who is pension dashboard delivery manager at Broadstone consultants, said:

“Until there is clarity on how rigid the guidance dates are and the flexibility schemes have to meet them or not then we anticipate, rightly or wrongly, that many schemes will simply defer acting”.

Does the Minister agree? Can he tell us when the guidance will be published, so schemes know how long they have?

I have a couple of other questions. If a scheme believes it cannot meet the relevant connection date in the guidance that applies to it, will it have to apply for deferral or can it just decide to go later, and what will be the process?

The Minister mentioned the position of schemes and providers regulated by the FCA. I think he said that the FCA will be asked to amend its rules to cover this. Can he clarify whether it will be the same guidance—that is, the guidance issued by the DWP—to which those schemes will have to have referred, or will the FCA develop its own guidance? What will be the penalties of failing to abide by it?

Connecting the state pension system in its broadest sense will be crucial to the successful launch of the pensions dashboard service and the public dashboard availability point. I think the new staging order will assume that public sector schemes and master trusts will join first. What is the Government’s current level of confidence that the digital architecture will allow state and public sector pension systems to connect in a successful and timely manner for the October 2026 deadline?

While we are on the dashboard availability point, I am still not quite clear on something. Can the Minister clarify whether pensions dashboards could be made available to the public before October 2026, when all schemes have to be connected? If the answer is yes, does this not mean that consumers could end up making decisions based on partial information, whereas they might have made a different decision had all their pension assets been put before them to make a judgment on?

It is evident that lots of questions are still outstanding. I do not often disagree with the noble Lord, Lord Vaux, but I fear that he was optimistic when he said that there was nothing much to be said about these regulations. I will certainly be interested in hearing answers to many of the questions, including the important ones raised by my noble friend Lady Drake on the evaluation process and costs and charges.

Ultimately, we need to know from the Minister what level of confidence the Government have in this reset programme. Can he offer us some arguments or evidence to back that up? Can he tell us that the Government have bottomed out the complexities involved? Are they satisfied that they can manage the issues of data accuracy and security, as raised by the noble Baroness, Lady Altmann, or identity verification? The latter was raised by the noble Lord, Lord Young of Cookham; once again, I commend his diligence and detective work on that matter. He raised some important questions which he has been raising for a long time, and I fear that we are no nearer to clarifying the answers.

We on these Benches have been very supportive of the creation of a public dashboard but we really do not want to be back here next July doing the same thing again. I hope that this is the beginning of a new start. I urge the Minister to keep engaging with us all and to keep us informed as we go. Let us hope that we get this right the next time.

Viscount Younger of Leckie (Con)

My Lords, I thank the Committee for its broad approval for these regulations. I start by making the point that it was helpful to hear from the noble Baroness, Lady Drake, who is highly respected in this House for her pensions expertise. She welcomed the regulations and pointed out that, back in 2019, in her view, these regulations were far from being ready—she is of course correct in saying that. I value her broad support this afternoon. However, I acknowledge that there are a huge number of questions to answer in this debate, for which I thank noble Lords.

Throughout their development, pensions dashboards have received cross-party support in both Houses. Your Lordships will no doubt share my disappointment that we have needed to amend the original timeline. It is vital that the foundation upon which the dashboards ecosystem is built is safe and secure, as I said in my opening remarks. However, I am certain that the Government have made the right decision in slowing things down for the benefit of consumers.

I thank my noble friend Lord Young. I am grateful to him for reminding us of past deadlines—and indeed of past deadlines missed. I reassure him and the Committee that we are getting back on track. I hope that, in answering a lot of the questions raised today, I provide reassurance on that.

My noble friend raised the revised Explanatory Memorandum. During scrutiny of the regulations, the Secondary Legislation Scrutiny Committee felt that the EM could have provided more detail on the impact of the amendment regulations. Officials in my department subsequently provided a written response to the committee, and the department has replaced the EM with a revised version that provides the further detail requested by the committee. The DWP recognises the value of parliamentary scrutiny and the requirement for comprehensive explanatory material. It has begun internal action to strengthen its assurance processes.

I will answer the question raised by my noble friend Lord Young on the One Login, probably towards the end of my speech. I very much take note of what he asked.

I turn now to the broader issues regarding the dashboards and the reset. This was raised by the noble Lord, Lord Vaux, and the noble Baroness, Lady Sherlock, but it is a general theme. For example, he asked whether we had made the reset too complex. He also asked how much the scope has changed. As I said in my opening remarks, dashboards are complex, but the design is right. It is based on security and information, and on an understanding, from user research, about the information that users expect. The scope has remained the same throughout.

The noble Lord, Lord Vaux, went further, in asking questions about why the delay came about. I am probably repeating myself, but it is a project of significant undertaking, requiring the development of new technology that will permit individuals to find their pensions by searching thousands of pension schemes, which collectively hold millions of pension records. It became clear that the PDP would require additional time to deliver the complex technical solution to enable the connection of pension providers and schemes. I believe that my department took swift action to address the issues as soon as we knew that they had arisen. As I said earlier, the delay is frustrating, but it is vital that the foundation on which the dashboard’s ecosystem is built is safe and secure.

The noble Lord, Lord Vaux, also asked about the cost to the taxpayer. The dashboard project is funded by the financial services levy and the general pensions levy. These levies pay for the Pensions Dashboard Programme and the MoneyHelper dashboard, including staffing costs. The PDP has a spending review allocation through to 2025-26, and allocations beyond this point have not yet been determined. As the regulatory impact assessment shows, there is an increase in direct costs to industry of £69 million. I hope that provides some help.

The noble Baroness, Lady Drake, raised the so-called Mansion House package. I will give an overarching response on that. Since her appointment, the Minister for Pensions has focused on reforms to the private pension system, which have centred on introducing greater fairness, adequacy and predictability for today’s auto-enrolled generation of savers. The DWP has been working closely with the Treasury on a package of measures set out by the Chancellor in his speech the day before yesterday, as the noble Baroness knows, all designed to drive better outcomes for pension savers.

These are all part of a wider government agenda to improve the opportunity for investment in alternative assets, including high-growth businesses, and to improve saver outcomes. We believe that a higher allocation to high-growth businesses as part of a balanced portfolio can increase overall returns for pension savers, leading to better outcomes in retirement. We want to ensure that our high-growth businesses of tomorrow can access the capital that they need to start up, scale up and list in the UK. I am happy to write to the noble Baroness with further information. She asked about the value for money framework, so I will write to her about that.

My noble friend Lady Altmann asked about enforcement actions for schemes and whether or not they adhere to the guidance. The timeline in guidance will not be mandatory. However, trustees and managers must have regard to the guidance on connection. Trustees and managers will be expected to demonstrate how they have had regard to the guidance, and a failure to do so will be a breach of the regulations and therefore could result in enforcement action. All trustees and managers must connect by the deadline set out in legislation. I reassure my noble friend that failing to do so could result in action by the regulator, as I suspect she probably knows.

Then the question of liability arises. If an individual makes a poor decision based on inaccurate information, what then happens? Making pensions dashboards work involves multiple parties, so the question of liability if something goes wrong needs to be considered, but on a case-by-case basis. Pension schemes, qualifying pensions dashboard services and MaPS will all be subject to complaints management by the relevant ombudsman. This means that if the party at fault does not deal with the user complaint satisfactorily, the relevant ombudsman may investigate complaints and make determinations to put things right.

My noble friend Lady Altmann asked about standardisation of data, which is an important question. The Pensions Dashboard Programme is seeking to standardise many aspects of data. The regulations set out clear requirements relating to connection and the value and other data. MaPS will publish standards relating to data. The Financial Reporting Council had updated its requirements regarding the calculation of values to improve the consistency of projections.

The noble Lord, Lord Palmer, asked about digital access. His specific question was about those who do not use it, which is a fair point. It is true to say that, moving forward, this is primarily a digital solution we are providing, but there are existing resources still available, including the provision of annual statements. I hope that gives him some reassurance about those who are not quite as digital as others.

The noble Baroness, Lady Sherlock, asked about transparency on progress. I remind her and the Committee that the PDP publishes a six-monthly report. Additionally, it holds a briefing sessions with interested Peers—which I pledge to do on a regular basis—and we are keen to give as much information as we can. I hope that, from past form, she will be reassured on that.

A number of questions were raised by not only my noble friend Lady Altmann but the noble Baroness, Lady Sherlock, and I will attempt to whisk through them in the time available. The noble Baroness asked whether, with a single compulsory connection deadline, there is a risk of a backlog of schemes trying to connect as the deadline—31 October 2026—approaches. That is a fair question, and other Peers raised the same point. The regulations include a requirement to have regard to guidance issued on connection. We will be engaging with industry on guidance that will set out the proposed connection timetable. There have been positive signs among leading providers of their intent to adhere to the guidance, which is helpful. Similarly, the ABI published a statement indicating that its members would look to connect as per the guidance. The Pensions Regulator may take action where the trustees or scheme managers fail to have regard to the connection guidance and is assessing whether any changes need to be made to its compliance and enforcement policy.

The noble Baroness also asked what action the department would take if there was evidence of back-ending and backlogs building up. The DWP will work with the Pensions Dashboard Programme and regulators to monitor connection activity, and will use insight from industry to inform how we can best help to maximise adherence and remove potential barriers for schemes. Our expectation is that, given the widespread support for dashboards, the schemes will adhere to the connection profile in guidance. However, to provide more reassurance, we will keep this approach under review and will consider changes, including further legislation—note that—if problems emerge.

The noble Baroness, Lady Sherlock, asked several questions in relation to our intention to publish a revised connection timeline in guidance. She asked—as did my noble friend Lady Altmann—when the guidance on proposed connection dates will be published. We will work with industry this year on agreeing the connection timetable to be published. We intend to publish it as soon as possible.

The noble Baroness, Lady Sherlock, asked what role the regulator would play in encouraging schemes to follow the guidance, given that trustees and managers must have regard to it. She and the noble Lord, Lord Palmer, also asked about clarity on encouragement to compliance. The regulator will write to all schemes, informing them of their proposed connection date, as set out in guidance, and the action that they need to take to connect by the set date. The regulator will expect trustees to be able to demonstrate how they have had regard to the guidance. As I mentioned earlier, failure would result in enforcement action.

5.15pm

The noble Baronesses, Lady Sherlock and Lady Drake, asked about “having regard to” guidance and what this means in practice, as well as what would constitute a breach in relation to not having regard to the guidance and what would happen if a scheme is ready to connect but a backlog makes it impossible. The regulations require pension schemes to connect no later than the date mentioned, 31 October 2026, and to have regard to the guidance, which will set out the connection timetable. In practice, this means that trustees or managers should not make decisions about connection until they have engaged with the guidance. Trustees must be able to demonstrate that they have adequate governance and processes for making such decisions, including that the reasoning behind such decisions had been clearly considered and documented and that the relevant risks had been identified, evaluated and managed. Trustees and managers should make sure that they have access to all the relevant information before making decisions and acting, and that they keep clear and accurate audit trails to demonstrate the decisions made and actions taken. If these requirements are not met, the Pensions Regulator may, as mentioned earlier, take enforcement action.

Moving on, I know that the noble Baroness, Lady Sherlock, expressed concern about what happens when a scheme believes it cannot meet the relevant connection date in the guidance and, on a separate point, whether it would need to apply for deferral. I reassure her that setting out the timetable in guidance provides the additional flexibility for the dashboard’s programmer and for schemes. The deferral regime is for schemes seeking to connect later than the mandatory connection deadline in the regulations. It would not be a requirement for a scheme to apply for a deferral to connect later than the proposed connection date in guidance, but trustees or managers would need to have had regard to the guidance before making a decision.

I know that the noble Baroness, Lady Sherlock, is interested in the role of the FCA, which she referred to. She asked what the position will be for the pensions providers regulated by the FCA. Subject to parliamentary approval of these amending regulations, the FCA will ask its board to change its dashboard rules for FCA-regulated pension providers to incorporate the October 2026 deadline that is in these amending regulations. Firms that fail to connect by this new deadline could be subject to the FCA’s existing supervisory and enforcement powers.

The noble Baroness, Lady Sherlock, asked whether dashboards could be made available ahead of the compulsory connection deadline in the regulations and whether this would have an impact on the quality of the consumer experience. Perhaps I can reassure her and the Committee that the point at which dashboards will be available will be when the Secretary of State for Work and Pensions is satisfied that the dashboards ecosystem is ready to support widespread use by the general public, following consultation with MaPS, the regulator and the FCA. The Secretary of State will consider factors including sufficient level of coverage; assurance of the safety, security and reliability of the service; and the testing of the user experience. As such, it remains the case that a specific date cannot be determined at present. However, the dashboards’ availability point could come before the connection deadline in the regulations.

It is possible to achieve 98.5% coverage of active and deferred memberships by connecting only those schemes with more than 1,000 members. This represents just over 1,000 schemes in total. Of course, there will need to be effective messaging on dashboards to ensure that users understand that, in a small number of cases, some pots might be missing. That is something that we will look at carefully through the user testing process.

In my opening speech I outlined the complexity of the delivery of the pensions dashboards, and I have already alluded to that in my closing speech too. The noble Baroness, Lady Sherlock, and the noble Lord, Lord Vaux, sought further clarity on whether the complexities involved have been bottomed out. I feel I might have answered that already, but I will say that the reset has confirmed that the steps to be ready to successfully deliver the dashboards remain the same but more time is needed to deliver the project.

I turn to some further questions raised by my noble friend Lady Altmann. She asked about the links between dashboards and the consultation launched on Tuesday, which set out proposals for tackling the growth in small pots—another theme from this debate. Pensions dashboards will revolutionise how people interact with their pensions, helping them to find and engage with their pension pots. At the same time, though, government action is needed to end the growth of deferred small pots, ensuring that members receive greater value for money for their pensions.

There are 12 million deferred small pots worth less than £1,000, and this presents huge challenges to the automatic enrolment pensions market and limits the value for money that members get for their pensions. On Tuesday we launched a consultation setting out our proposed framework for a default consolidator model. It closes on 5 September this year and we encourage interested parties to engage with it. Our vision of a small number of default consolidators will help to address the current and future stock of deferred small pots while ensuring that members are consolidated into a small number of high-quality schemes that deliver greater value for money for their members through the economies of scale that that brings to them.

My noble friend Lady Altmann and the noble Baroness, Lady Sherlock, spoke, importantly, about data security. I have spoken about this before but I want to say a bit more about it. I assure the Committee that safeguarding consumers is fundamental to our approach, and that pensions dashboards and the technology behind them are designed to maximise data security. Pensions information is sent directly and securely from the scheme to the individual. It is not stored centrally by either qualifying pensions dashboard services or the digital architecture. Security standards ensure the appropriate level of security, following National Cyber Security Centre standards or best practice. They detail the practical authentication requirements for communication between parties within the ecosystem, encryption requirements for all data in transit across the ecosystem and the requirements for security testing interfaces to the ecosystem. I have a little more to say about that but, bearing in mind the time, I will write with further information on that important point about data security.

Bearing in mind the time, I promised to provide a response to my noble friend Lord Young about One Login, and I will conclude on that note. The pensions dashboards programme has procured an interim identity service provider, as my noble friend has pointed out, whose contract runs until January 2024. The service that it provides is in line with the Government Digital Service’s good practice guide. Presently the Money and Pensions Service is engaging with officials in the Cabinet Office and the Government Digital Service, as well as the wider market, building on previous engagement work to identify all possible options that may comprise its new identity service delivery model, which in short means that the One Login system is under way. Although I cannot put a date on that, I hope that helps to answer my noble friend’s question—maybe not.

Lord Young of Cookham (Con)

My noble friend has been very helpful. Is it the Government’s objective that the Government’s One Login will be the access point to the pensions dashboard?

Viscount Younger of Leckie (Con)

The answer is yes, eventually, but I will need to write to my noble friend to qualify what I mean by that. That is the aim and it makes sense, but I cannot say that it will be by a particular date. I shall write to my noble friend.

I shall conclude quickly because I realise that others are waiting for the next debate. I thank all noble Lords in the Committee for the points that they have made. I commend the regulations to the Committee.

Motion agreed.