Why DC pensions should follow the science


The country has learned a new respect for data during the lockdown. Following the science has led us to a better understanding of mortality and we understand from track and trace how understanding data protects us from infection. The public has made their data available pro bono – indeed data sharing has become an exemplum of us all being in it together.

Initially Government considered the pandemic would delay the progress pension was making towards data sharing. The newly established Pension Dashboard Programme delayed its consultation on creating a data standard because it was thought the industry itself would lock down. Although a few pension providers did struggle to re-establish service centres remotely, the anecdotal evidence – typified by the vox pop of Pensions Buzz, suggests a prodigious explosion of innovation with businesses adapting to a world without post rooms, or printers or paper. We have gone digital with a massive explosion of relief. There is a new-found confidence in digital communication and a readiness to accept new ways of doing things that I haven’t seen before.

The eagerness  to “build back better” accepts that whatever the new normal will be, it will not involve the same degree of business travel, post, printing and paper. The new ways of working will accept that home-working integrates with office working and that information is shared digitally. Our capacity to use hardware, software and to delight in innovation is one of the positives of the past six months. Awareness of the health of the planet are matched by a new openness about mental and physical well-being. And we are finding new ways to measure progress with data.

Latterly Government is finding new confidence in its digital agenda and I am struck by the Pension Minister’s confidence that intractable problems can be solved by following the science

The digital agenda obviously starts with the Pensions Bill and the mandating of data to be shared with the Pensions Dashboard. The Bill will receive its final reading in the Commons in September and the DWP want to see it enacted soon after. The creation of mandatory sharing of data between 42,000 occupational schemes, and over 1m employer schemes within master trusts and Group Personal Pensions will mean exposing data, warts and all to its rightful owners, the general public.

Once the principal that our pensions data must be shared has been enshrined in law, we expect to see greater confidence in the public to ask questions about the value they are getting for the money they have set aside for later life.  The FCA has grasped VFM by the horns with its CP20/9 consultation challenging IGCs to work towards a single definition of VFM.

We expect that in September the Pensions Regulator will deliver its consultation response on the consolidation of DC pensions. The FCA’s answer to increasing competition is to empower employers with a VFM assessment from the IGC. If tPR are to align to the FCA’s proposals, we can expect a similar approach.

However, while it’s one thing for an IGC or Trust to assess itself once, it’s another to assess each employer. While Nest and People’s don’t offer special terms, some insurers offer up to 50 charging structures and many offer employer specific defaults. In a competitive market, these features are required for providers to win business. The FCA call such special arrangements, employer schemes

The FCA are suggesting that employer schemes need to compared with comparable arrangements to ensure they are providing members with value for money. But this will require a much more robust benchmark than exists today. There is no comparable benchmark that measures the impact of costs and performance on member outcomes and there is no standard assessment of quality of service.

The creation of a standards for VFM needs an over-riding definition of pension value for money, and it needs a common means of assessment – delivered through data analysis.

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About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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