Regulatory consultations are interesting in a number of ways
11 February 2019
…at least they are to geeks like me, says Gareth James, head of technical resources at AJ Bell
Part of my thought process when considering consultations and the questions raised is always, what questions should the regulator have asked, and why didn’t they?
Questions might be excluded for reasons as innocent as keeping the scope of a consultation manageable. In other cases my cynical side wonders whether questions have been excluded because the regulator doesn’t think it will like the answers as they might push policy developments down unattractive avenues.
Several ‘unasked questions’ sprung to mind after I’d reviewed the DWP’s recent pensions dashboards consultation. For this article, I’ll consider just one of them.
Should the pensions dashboards be limited in scope to pensions, or should it be widened to include non-pensions that may play a role in retirement savings?
The obvious answer is to limit to pensions. It’s a PENSIONS dashboard after all!
There are a number of strong arguments for restricting the scope to pensions, at least as part of the initial launch.
3 potential reasons why not
The first springing to mind is the risk that widening the scope will lead to further delays – we’re nearly three years from the initial 2016 Budget dashboard announcement and we’re still at a stage where Government is asking questions about how the dashboard should work. If it’s taken nearly three years to get here, surely widening the scope to include non-pensions and risking further delays would be a bad idea?
We also have to consider regulatory authority. The pensions dashboard is a DWP initiative. Pensions are something over which the DWP can exert regulatory control and, as is proving necessary, compulsion. If the dashboard is extended to include non-pensions, how is this authority and compulsion exerted?
Finally, and most importantly, we need to consider the impact on those using the dashboards to find out what their retirement will look like. Will including non-pensions confuse users? Will it create unrealistic expectations of the extent to which those assets can contribute towards retirement? Will it water down the distinction between pensions and other savings products, with the ‘purity’ of the focus of pensions on providing a retirement income and the associated tax relief rewards being put at risk?
Addressing the last of those arguments first, technology and the way in which savings information is presented has already moved on considerably since the dashboard was announced in 2016. Apps and services are emerging that allow users to gather information regarding all of their savings and debts in a central location.
Functionality is also planned, where it doesn’t already exist, allowing users to opt for this information to be updated automatically. That sounds a lot like a dashboard, but one not restricted to pensions. If these tools are already available before a pensions-only dashboard launches, is the risk of coverage being restricted to pensions higher than the risk of confusion?
We also can’t ignore that plenty of people view non-pensions as playing a crucial part in their retirement plans. “My home is my pension” is a cliché and also a potentially dangerous planning strategy, but it needs to be accounted for. Huge numbers of people see the value in their home as being key to their retirement.
Assets including ISAs, premium bonds, deposit accounts and National Savings investments also play an important part in many plans. We even now have a non-pensions product, the Lifetime ISA, offering tax incentives specifically aimed, alongside property purchase, at retirement saving. Why shouldn’t a retirement-focussed savings product like the LISA be included on a retirement-focussed dashboard?
The lack of ability for the DWP to compel non-pensions providers to provide information to a dashboard must be a red herring. Different regulators need to be able to work in a joined-up fashion and, even in areas where compulsion won’t work, dashboards could be developed with the functionality for users to add their own assets and liabilities – as is the case with some of the tools already available.
Turning finally to the potential for inclusion of multiple different asset classes to lead to delays in launch, we need to remember that a phased launch is already planned. Whatever is launched in 2019, and it’s extremely important that the DWP proactively manages expectations on this matter, it isn’t going to include all pensions.
This need for phasing isn’t driven by technology issues with the dashboard itself – technology providers already have the ability to gather information from multiple sources in a single place. Phasing is needed because some pension providers aren’t in a position to provide data. This raises a question of whether the problems some pension administrators will have with data provision should prevent non-pensions firms from providing data, or users from entering this themselves.
It appears clear that inclusion of non-pensions data isn’t planned for the dashboard – if it was up for consideration the question would have been asked in the consultation. My question is, should the Government be asking the question?
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