Impact assessments (IAs) are a key tool of the trade for civil servants, especially for analysts, the unsung heroes whose job it is to evidence and weigh up the costs and benefits of policy solutions. So, in a recent debate on the Draft Pensions Dashboards Regulations, it must have been nice to hear Baroness Sherlock, Labour pensions spokesperson in the Lords say:
"I read the impact assessment and I had a lot of fun with it. I know that it is a very anoraky thing to say but, my goodness, what a great document.”
‘Anoraky’ or not, the dashboards IA hasn't had the broader attention it deserves. When I mentioned it at a recent event, a couple of people queried my figures – particularly the estimate of 16.3m dashboard users by 2026 – and asked for more information. So, here is my high-level analysis of the IA, some policy clues it contains, and what needs to happen to make the numbers realistic.
What are the costs?
The main purpose of the IA is to compare the benefits and the costs. And there’s no need to remind anyone in the industry that the costs are high. However, some of the costs are not unique to the project - arguably, data should be clean already, schemes have multiple concurrent data challenges to meet, and producing fund values quickly (ideally in real-time) has a benefit well beyond dashboards.
This leads to further questions about the costs that need to be addressed: where are the costs going in the later years, and what does that mean for the long-term governance of the programme? Does it take account of the inevitable change requests, or even future policy decisions about expansions to scope? These are important details, but it's striking that no-one is really complaining about the costs, demonstrating the degree of support for the policy.
What are the benefits?
On the benefits side of the equation, there is a lot to dig into, and I'm delighted to see ABI work quoted extensively. First, recovery of lost pensions is a major direct benefit of dashboards. In 2018, the ABI commissioned the Pensions Policy Institute to assess the scale and impact of ‘lost’ pensions, where providers no longer had the customer’s current contact details. This was updated this year and found 2.7m pots worth £26bn – a huge prize. Of course, not all of these are ‘lost’ or need a dashboard to ‘find’ them, but the IA shows that £540m could be recovered by dashboards. This could be a huge underestimate, as the PPI figure doesn’t include the whole market, or any defined benefit pensions.
The second half of the direct benefits of dashboards arise from Consumer Surplus, a term I don't remember hearing since studying economics - what people would be willing to pay for, but are getting for free. This is not to be sneezed at, adding up to £578m, and is a reminder that what the industry is delivering here is a new public good.
However, both of these figures depend on their projections of how many people will use dashboards – the IA’s central estimate puts it at 16.3 million users per year. This is the figure that raised an eyebrow when I mentioned it. It is plausible, but it really depends on decisions yet to be made. If consumers can access dashboards easily, in places they already use online, with a simple sign-up process, it could even be an underestimate. This means a slick digital identity solution is needed, and the ability to integrate with other data - the intention of Open Finance - but these simultaneous developments and the connections between them are often overlooked.
Consultations
The FCA's consultation on regulation of dashboards, and the PDP's consultation on design standards, are critical to achieving their ultimate aim. The consultations are detailed and there is a lot to take in. The FCA paper introduces the concept of ‘post-view services’, which reflects the point made in the ABI’s vision for dashboards that services are needed alongside dashboards to help customers make sense of the data. The points of debate are likely to be:
- Are the barriers to entry at the right level, including for third party suppliers of dashboards and the firms which might use them?
- Are the rules around ‘post-view services’ and export too restrictive to make those services useful?
- Most importantly, does the end-to-end journey meet customers’ needs?
Who will use dashboards?
The number of people using dashboards also depends on who uses them; the IA diligently takes account of the ‘say-do’ gap in consumer research and evidence from overseas. It cites the research by Britain Thinks, commissioned by the ABI, which found the youngest people are most likely to use dashboards. This contrasts to PDP’s own research and some international evidence, which found that it’s mostly, but far from exclusively, people approaching retirement using dashboards. To reach a range of people, dashboards need to cater for a range of needs.
When will dashboards be ready?
The total benefits over 10 years also depend on how quickly usage will ramp up, and here there is a potentially juicy clue about when dashboards might be available to the public. DWP's central assumption in the IA is October 2024, with an earlier date of May 2024 that seems unrealistic and a later one of April 2025 that might be disappointing. Of course, there will be six months’ notice, and this will be subject to further discussion with stakeholders about the criteria to take into account.
Aside from these numbers, there are many more benefits mentioned as ‘desired changes’ in the IA, but not quantified as they can't be specifically attributed to dashboards. A scan of the policy history of dashboards shows they have been cited as a way to help achieve numerous goals, including:
- Small pots accrued through automatic enrolment, as cited in the pot follows member IA in 2011.
- Retirement decision-making and competition, as recommended by the FCA's Retirement Income Market Study in 2014.
- Improving access to, and cost of, advice by reducing legwork and admin hassle for financial advisers, as noted by the Financial Advice Market Review in 2016
On top of this, there are less tangible benefits like engagement, leading to the real benefits the industry hopes it will deliver to consumers, like consolidating pensions and saving more. In time, consumers could be able to update their addresses and other details more easily. For these intangibles and indirect benefits, the overall value of dashboards also depends on their reach, what dashboards look like and what they can actually do. The FCA, PDP and DWP have a tough job to balance maximising reach and ensuring good outcomes, but that is what they must do to realise the benefits.