FRC will also need to outline how to treat direct investments such as exchange-traded funds, although it has said unquoted assets, such as property, should assume a real growth rate of zero.
The calculation methods for point-of-sale illustrations and annual illustrations are different. In the interests of keeping things simple and accessible for pension consumers it would be good if the FRC and FCA work together to agree a single workable approach.
The ERI will be the level single life annuity (with no guarantee) that can be bought at the retirement age for the member using the projected pot value. It will assume no tax-free cash is taken. Obviously, many consumers will choose a different approach, such as using drawdown and probably taking some lump sum.
Dashboards will have to carefully explain how the income is illustrated and also make it clear that consumers still have choices about how to take income.
Will dashboards only show information?
Yes. The intention is the dashboards will only ever show static information. The PDP is clear the ecosystem will not do any computation or store information.
However, it is recognised this may not encourage people to engage with their pensions. So, the DWP is considering allowing those who offer a commercial dashboard to export data out of the dashboard environment.
This could then be used in another part of the provider website to offer customers ‘what if’ scenarios using the data, for example by changing their retirement date, or making higher contributions.
Some dashboard providers may also encourage people to explore consolidating their various pensions plans to access lower charges or different investment strategies. The government might also see this as a way to solve the small pots issue where an individual has built up multiple small auto-enrolment pension plans with a variety of providers.
When do dashboards go live?
The Pension Schemes Act 2021 compels all pension schemes, regardless of size, to eventually connect with the dashboard ecosystem. For pensions dashboards to be a success they have to cover the whole pension environment, and only by putting this compulsion into legislation can the government be assured all schemes will participate.
Pension schemes will connect with the PDP ecosystem on a staggered basis. There will be three waves. The first wave will start April 2023 and will include the biggest schemes. Medium schemes will form the second wave between October 2024 and October 2025, and small and micro schemes are likely to be in 2026.
Once a critical mass has been reached, covering, say, 95 per cent of all pension accounts, then the dashboards will officially launch to the public. Currently there is no set date for this, although it is expected to be around summer or autumn 2024.
