1. “You have asked what action can we take to help ensure the potential of open banking is maximised“.
This response is from Pension PlayPen. Pension PlayPen was set up in 2013 to help small and medium size employers establish workplace pensions for their staff. Since opening it has helped nearly 10,000 employers, operating directly to employers, working with payroll software companies and through payroll bureaux and accountancy practices. Pension PlayPen’s most popular services were both digital, we helped employers work out with the help of our software the cost of auto-enrolment and provided an online “choose a pension” service that helped employers match the workplace pensions to their workplace resources and the needs of their staff.
We worked with organisations such as Sage – with whom Pension PlayPen has an exclusive partnership, to establish APIs between payroll software and workplace pension providers and noted over the 6 year staging period how aspects of the open finance initiative were adopted and the barriers that means that most data for 1m+ employers operating AE workplace pension schemes is still down and uploaded manually with data transmitted by email.
We are making this submission because we expect the efficiency of the payroll/provider interface could be greatly improved if data could flow as easily as money – which would mean “open pensions” resulting from open banking.
To quote Alan Chaplin who developed of APIs that linked payroll and providers “Payroll offers a good reason why pension dashboard infrastructure should be open … any payroll provider could then include pension information directly on payslips. I expect that is far more effective than signposting a single government provided dashboard”
We talk here about how open finance can be used to improve the operation of the interfaces between workplace pension providers and how employer payrolls can use data from open finance to help employees take decisions around their workplace pension savings
2. “You’ve asked for our views on what open banking teaches us about the potential development of open finance.”
In 2013, a group of pension providers, payroll practitioners and software developers formed a committee to establish a common data standard which would lead to the adoption of a single protocol with which to pass data between payroll and pension providers. This standard became known as Papdis, but it was only adopted by a limited number of providers and eventually fell into disuse. Although the Pensions Regulator was represented on the group, there was no Government intervention and – once NEST refused to adopt the data standard, Papdis lost any authority.
The adoption of open banking teaches us that data-led industry initiatives need Government intervention and that arms length Government bodies such as NEST (and MAPS) need to lead and not look on.
3. ‘You have defined Open Finance as the re-use of people’s financial data for their benefit’.
The success of open finance depends not just on the sharing of data, but on that data benefiting ordinary people. Too much pension information goes unread, delivered in thick envelopes that go straight in the bin. Pension information needs to be clear, vivid and real and it needs to de delivered in ways that engage and prompt positive behaviours. The vast majority of pension saving goes on in the workplace and money is collected and distributed by payroll, it makes sense for payroll to organise the data that people need to engage with their pensions. We see payslips as portals to dashboards which can help people make sense of their pension saving, turning pots into retirement plans. Payroll is uniquely place to capture people’s attention, workers look at payslips and payslips are increasingly electronic.
4.“You’ve asked if we agree with your assessment of the potential benefits of open finance and whether there are others?”
You define the benefits of open finance in terms of consumers and service providers. We think that employers can also benefit from open finance, if they are given the opportunity to promote their workplace pension through the payslip. The key benefits from employers are (i)increased payroll and HR productivity resulting from reductions in manual processing of pension information and (ii) improved engagement from staff with their workplace pension and of the employer contribution to the pension pot. There are other benefits, the comments of “Robert” from Tata Steel (Below) show how a full integration between a pension provider (Aviva) and a workforce (Tata Steel) can be achieved today. Such integrations are rare today but could become commonplace if we can break down barriers.
5.You ask “what we can do the maximise these (4) benefits”.
The Call for Input mentions the Pensions Dashboard and this will be the primary driver for a change to “open pensions” but there is a danger that the dashboard could become a closed loop in which a small amount of what consumers need is made available and the prescriptions of Government actually prevent rather than encourage innovation. The delays in implementing pension dashboards have resulted from arguments over the involvement of “for profit” organisations, as this document suggests, the interests of consumers and businesses can both be served by removing the impediments to free-flow of data. Open Finance has a role to play in demonstrating to all pension dashboard stakeholders , the maximum benefits that they can bring.
Robert, a steelworker from Port Talbot who has become interested in pensions through changes to the British Steel Pension Schemes commented on a recent article by Henry Tapper https://henrytapper.com/2019/
“The TATA Steel UK online monthly payslips include among other things:
Top up contributions – salary sacrifice / Pensionable pay / Employee pension / Top up contributions / Employee pension – salary sacrifice. These figures are refreshed at the start of each financial year.
The TATA Steel UK Personal Retirement Savings Plan (PRSP) is provided by Aviva. They have an excellent website where you can view/manage your pension and they also send communications and annual statements in the post.
Perhaps it would be a good idea for the Aviva Plan total value and contributions to be included on the TATA online monthly payslips as some may find this beneficial?”
6: You ask if there is a natural sequence by which open finance would or should develop by sector?
We will talk of open finance within the pension sector as “Open Pensions”. UK pension rights divide between those defined by rules (state and second pillar defined benefits) and DC pensions which are in effect pension savings plans where outcomes are managed by the savers with absolute freedom. It makes sense to sequence the development of “open pensions” by focussing on the challenges facing the DC saver. In its recent consultation on the simplified pension statement, the DWP explained it intended to start its roll-out with workplace pensions. We suggest the same sequencing for the roll-out of open pensions. They can be followed by SIPPS used for wealth management and then access to data from DB pensions, including the state pension.
7.You ask if we agree with your assessment of the potential risks arising from open finance and whether there are others?
With regards the scope of this submission, we see risks from open finance as being minimal. The free flow of data to and from provider data-bases to workplace pensions and back again using APIs should be low-risk. Where risks can occur is in the interpretation of data by savers. We believe that regulatory failings are in the lack of intervention which have meant that initiatives such as Papdis have failed. Both the Pensions Regulator and the FCA need to work with Government departments , especially HMT DWP and BEIS to ensure that we get open pensions. The risks of continuing to use manual data uploads and downloads is much higher than adopting Open Pensions.
The risk of the pensions dashboards failing are substantially increased if they cannot be generally referenced. Payroll and particularly payslips can be the portal for dashboards, failing to work with payroll would be a grave mistake for regulators looking to introduce open finance
8. “You asked if we consider the current regulatory framework adequate to capture these risks?”
We are not experts in the FCA’s regulatory perimetre but consider the Pensions Regulator’ guidance /on these matters will be considered (as part of the master trust authorisation regime), extremely influential. The Pensions Bill mandates the DWP and tPR to enforce the provision of data to dashboards and, assuming this Bill is adopted, the framework for open pensions is in place. We urgently need the momentum created by this pending legislation to be maintained,
9. “You asked what barriers established firms face in providing access to customer data and what barriers TPPs face in accessing that data today?”
We have remarked in the submission of our sister organisation “AgeWage” that “dog-in-the-manger’ tactics are common among many pension providers who sit on their customers data for fear of losing their customer’s support.
The impact of data retention is to alienate customers not to help them. Unfortunately this can lead to bad consumer outcomes such as cashing out pensions or – in extremis – transferring pension rights which have got valuable guarantees embedded in them.
11. “You asked if we have views on the feasibility of different types of firms opening up access to customer data to third parties?”
Simply opening a dashboard is no different than posting a website, unless people visit , the dashboard is of no use. The pensions industry lacks a coherent strategy for getting information to its mass market, the nearly 20m people saving into workplace pensions. The DWP has put its confidence in the Money and Pensions Service but we do not share that confidence. Pensions Wise has not been a great success with low take-up rates and less than 10% of its target market taking up its offer.
There are very few financial information systems that ordinary people trust but payroll is one of them. People read their payslips and take pains to understand them. They will do, like Robert at Tata, appreciate pensions information when presented to them by payroll – on their payslips. The CIPP estimate that the vast majority of payslips are delivered electronically making payslips an obvious place to give people access to their pensions.
Employers have been tasked with delivering auto-enrolment and they have made a thoroughly good job of it. Credit must go to payroll for helping employers out. Industrial relations in this country are good, people generally trust their bosses , trust payroll and consequently trust that their workplace pensions have been properly established and managed. Using this trust could be the making not just of pension dashboards, but open finance.
13. “You asked if we have views on how the market may develop if some but not all firms opened up to third party access?”
We are sanguine about some non participants. Consumers – when searching for financial products are used to hearing that some providers could not quote on-line and recognise that sometimes it won’t be possible to have perfect information.
Many pensions offer a defined benefit or are hybrid where the benefit is a guaranteed annuity or a with-profits pot value that may need manual calculation. Many legacy pension contracts are not set up to provide on-line values and will never do. But this is not a reason for abandoning open finance – 90% solutions still work.
Pension PlayPen had to exclude many providers from employer searches because providers did not provide the data on which it could do due diligence. Despite this, Pension PlayPen offered a solution that worked
14.“You asked what functions and common standards are needed to support open finance and how should they be delivered.”
We are encouraged by the work of the OBIE and see much of it as replicable in other areas (such as pensions). We know several members of the Open Finance Advisory Body and are very encouraged by their analysis of what standards need to be in place; specifically- the technology architecture (eg open APIs)
• operating principles, processes and practice
• security protocols
• certain areas of user experience design
• service level agreements for performance
• liability models
• dispute resolution
• consent management and data rights
• authentication and identity management
To these we would add the need for training of those who run the customer interfaces at data providers who have been inculcated by a culture that says “computer says no”. We don’t just need standards, we need training to ensure they are met and maintained.
Had tPR treated the Papdis initiative with greater interest, we might well have the framework for open pensions available today.
15. “You asked if we support the BEIS smart data initiative”
We favour introducing individual Smart Data initiatives across all “regulated markets”, i.e. utilities, communications, rail, and financial services. These initiatives would essentially be separate from one another and subject to specific rules, albeit with a high degree of coordination . We see this each initiative as mutually supportive and supporting public confidence in GDPR and data protection in general.
We see the benefits of helping payroll work with pensions as including greater productivity. This should be a prime objective BEIS.
16.”You asked to what extent should the standards and infrastructure developed by the OBIE be leveraged to support open finance?”
It should be noted that payroll already operates a system of data sharing, with HMRC. The Real Time data initiative is now fully embedded into payroll software and processes. What’s more, TPR’s auto-enrolment enforcement capabilities are based on a study of this data. Payroll’s familiarity of plugging into third party systems can be leveraged to deliver open pensions relatively quickly.
Some pension providers, notably Smart Pensions, have pioneered the use of APIs and have been calling out for the data standards intoduced by the CMA and enforced by OBIE.
17.”You’ve asked if we agree that GDPR alone may not provide a sufficient framework for the development of open finance.”
We do not see GDPR in itself as capable of enabling Open Finance to deliver on its potential. We need more detailed intervention from regulators (for pensions both the FCA and tPR). These interventions are needed both to free up data and to ensure that consumers are protected from potential abuse from those interpreting data and using it for commercial purposes.
18.”You asked what other rights and protections are needed and if the open banking framework the right starting point.”
We think the open banking framework is the right starting point for establishing the consumer rights and protections needed to establish and run pension dashboards and other initiatives needed by people saving for and creating adequate personal retirement plans . There are a number of particular risks faced by the long term investor, notably the risks of being scammed by unscrupulous investment managers who recognise that long-term investments can easily become Ponzis.
19. “You asked what are the specific ethical issues you need to consider as part of open finance”.
We are mindful of recent scandals relating to the selling on of personal data to those who can exploit it for commercial gain. While much of this commercial activity is acceptable, risks from identity theft are all too real. The privacy of data is a matter for each individual but those who are managing data must be aware of decency levels and abide by the general principle of treating customers fairly.
20.”You asked whether we have views on whether the draft principles for open finance will achieve your aim of an effective and interoperable ecosystem”.
We believe that the FCA get help create an effective and interoperable ecosystem for open finance. Our confidence is based on the platform that has been created by open banking and on the capacity of parts of the industry we work in to adopt open standards when required to. We are thinking of the way in which payroll and providers have developed interoperability to manage the challenges of auto-enrolling 10.5m workers through over 1m employers.
For Open Finance to take off, there need to be clearly laid out problems which open finance can be used to solve. We can see the problems that need solving in our niche in the larger market, we suppose that other sectors such as general insurance, mortgages and consumer credit will find their problems too.
For all the sectors who could use open finance to work together, the general set of principles will be helpful. But we the need granularity in regulations that go beyond general principles and ensure that initiative such as the pensions dashboards can flourish. That granularity needs joined up regulation.
21.”You asked how should these set of principles be developed and whether we have views on the role the FCA should play”.
We have found this call for input very helpful in developing our strategy. The development of these principles need to incorporate the input from all respondents. The FCA have the resources to do this properly and your proven ability to work with organisations such as the CMA and BEIS gives us confidence that Open Finance could be an example of truly joined up government. We want to see initiatives such as digital identities incorporated into the pensions dashboard and the FC can be the interface between cabinet office and the pensions community.
22.”You asked if we have views on whether any elements of the FCA’s regulatory framework may constrain the development of open finance”.
As we have mentioned, we have seen examples where the FCA’s regulatory framework haven’t worked to the consumer’s interest. We give as an example the handling of DB pension transfers where we feel the FCA were too ready to listen to intermediaries and did not listen to trustees , employers and consumer advocates.
Another example where the regulatory regime comes up short is in engaging with collective pension schemes. We think that initiatives from other parts of Government, such as the DWP’s work on CDC, have not been properly embraced by the FCA’s policy teams and this has given rise to an “us and them” perception of regulators. We think that pension initiatives like CDC should be better embraced by the FCA. We say the same things to tPR about FCA initiatives like Open Finance. It is natural for financial services to work in silos, it is a broad industry, but we need more regulators who take a holistic view of consumer issues.