Dashboard ready? Who should foot the bill if administration systems aren’t fit for purpose?

You will have likely read several articles over the past couple of years around the introduction of pension dashboards, many of which (including this related blog post from my colleague Adrian Kennett) have posed a simple question to Trustees:

“Are you dashboard ready?”

What is becoming increasingly clear is that in many cases, the simple answer to this question is “no”.

We have heard several instances of administration providers informing Trustees that they are not in a position to provide a pensions dashboard, which is geared-up to connect to the eco-system, and which will require extra time (beyond the connection deadline) or funding (outside of the normal service agreement) in order to do so.

Trustees should check what the connection deadline is for their schemes; this is the date by which they are legally required to be connected to the pensions dashboard.

What does providing a pensions dashboard involve?

The Pension Dashboards Programme (PDP) has confirmed that providing a pensions dashboard will be a regulated activity, therefore all providers will need to gain authorisation from the Financial Conduct Authority (FCA).

In order to be considered ready to join the pensions dashboards eco-system, dashboard providers will also need to demonstrate that their service is compliant with the standards set by the PDP.

Why aren’t some administrators ready?

Several years of underfunding, poor planning, or a combination of both mean that some administration providers are not yet in a position to deliver a service which their clients (the Trustees) and scheme members require.

This leaves Trustees in a rather unenviable position with several pretty unpalatable options:

• Trustees can stump up the cash, effectively paying to modernise the administration providers systems out of scheme assets.
• Trustees can consider moving the administration services to a new provider; usually a painstakingly slow and expensive process.
• Trustees can sit on their hands waiting for the administration provider to get their systems in line, potentially opening themselves to the risk of non-compliance penalties (more on this below).

What will happen to schemes who are not dashboard ready?

The Pensions Regulator (TPR) has authority under the Pension Schemes Act 2021 to fine businesses up to £50,000, and individuals up to £5,000, for non-compliance with dashboard regulations.

It should not be underestimated how serious TPR is about dashboards:

• As we negotiate a cost-of-living crisis, it is vital that the general public are engaged with their retirement savings, aware and actively considering what benefits they will have in retirement.
• The average UK worker will have 11 jobs across their lifetime; with the introduction of automatic-enrolment it is important that people have easy access to all their pension benefits in one place.
• The UK faces the prospect of being left behind by other countries (Australia, Sweden etc.) who already have fully operational dashboard systems in place.

Should the scheme foot the bill?

Other than in exceptional circumstances, it is difficult to justify why an administration  provider should be passing costs for developing administration systems on to a pension scheme, particularly in order to comply with regulations which have been on the horizon for several years.

We are of the opinion that Trustees should remain strong on this point. The vast majority of administration providers will have a number of pension schemes who will all be going through the same process. Having systems that are fit for purpose and compliant with legislation is ultimately a cost of business, rather than an inconvenience to be palmed off.

Similarly, if Trustees are tendering for a new administration provider, ‘dashboard readiness?’ is a question that should be included in any request for proposal.

In instances where Trustees have no success in their conversations with administration providers, there are some third-party operatives currently developing pensions dashboards who may be able to connect the scheme as a more time-efficient, cost-effective option.

Do Trustees still have time?

Whilst the pension dashboard connection deadlines are steadily approaching, there is still time for Trustees to put plans in place.

We would encourage Trustees to engage with their administration providers as quickly as possible. Understanding their scheme’s position and time-scales for ‘dashboard readiness’ is going to be key to achieving a successful outcome. Trustees should develop a project plan and monitor progress at regular meetings to ensure things are moving in the right direction.

If you have any questions or concerns, or would like to discuss what support we could potentially provide on pensions dashboards, please do not hesitate to contact us.