Dashboard to cost businesses up to £1.5bn

The pensions dashboard could cost businesses up to £1.48bn, the Department for Work and Pensions (DWP) estimates in its Pension Schemes Bill Impact Assessment report.

The DWP's impact assessment has estimated that the one-off implementation cost to businesses could range from £200m to £580m over the next 10 years, with ongoing costs ranging from £245m to £1.48bn for the same period. DWP also predicted a familiarisation cost of £2m for year one only.

The costs were estimated under three scenarios, with different data requirements and coverage taken into consideration, in order to provide a more representative range of potential costs, the report stated.

However, the report also said: “There may be some benefits to the pensions industry if the dashboard leads to less contact from members looking to retrieve their information (eg fewer customer telephone calls).”

Highlighting that potential changes in member behaviour could see increased revenue for providers, it also acknowledged that while dashboards are intended to be free at point of use, consumers “may bear some indirect costs” if the industry passes on their own costs.

DWP did not include estimated costs to government of providing state pension data and did not provide a calculation using the Regulatory Policy Committee’s measure of equivalent annual net direct cost to business (EANDCB)

As well as providing a framework for the pensions dashboard, the Pensions Scheme Bill, introduced in House of Lords earlier this month, includes legislation to establish collective defined contribution (CDC) scheme and enhance The Pensions Regulator's powers.

The impact assessment also outlined details for proposed changes to the existing statutory right to transfer provisions, which the report predicted would see “significant personal benefits” for individual members.

The EANDCB for these changes was predicted to be £0.6m, but the report also outlined new administrative costs to members, which it estimated to be a total cost of £0.3m a year.

Commenting on these transfer proposals, Aegon head of pensions, Kate Smith, said: “Once enacted, at least one of three new conditions will need to be met.

“The more challenging condition is that members will need to prove there is a genuine employment relationship with the new scheme.

“The additional checks will mean increased costs for schemes, but this is a price well worth paying to protect members’ hard-earned pensions from being transferred to fraudulent schemes where they risk losing all their savings.”

The largest EANDCB estimate was for the new requirements around statement of strategy and the appointment of a chair.

However, the report also assumed ‘negligible’ familiarisation costs and clarified: “We estimated a scope of around 850 schemes that did not already have a chair of the trustee board, this represents just over 15 per cent of DB schemes. We estimate the ongoing costs incurred to businesses to be £19.5 million per year. The cost incurred to each scheme is assumed to vary depending on the size of scheme.

“There will be some associated costs with submitting the valuation for schemes in surplus. It is estimated that it will cost around £9,000 in total for businesses to submit a valuation where they are in surplus per annum.”

The report described the overall impact of the bill as a “moderate net cost to pension schemes and employers, in order to ensure the millions of private pension scheme members across DB and DC schemes benefit from increased security of their pension benefits, reduced risks of scams, and better information around their pension saving”.

    Share Story:

Recent Stories

A time for fixed income
Francesca Fabrizi discusses fixed income trends and opportunities with Goldman Sachs Asset Management Head of UK Pensions Solutions, Fixed Income Portfolio Management, Henry Hughes, in our Pensions Age video interview

Purposeful run-on
Laura Blows discusses purposeful run-on for DB schemes with Isio director, actuarial and consulting, Matt Brown, in Pensions Age’s latest video interview
Find out more about Purposeful Run On

Keeping on track
In the latest Pensions Age podcast, Sophie Smith talks to Pensions Dashboards Programme (PDP) principal, Chris Curry, about the latest pensions dashboards developments, and the work still needed to stay on track
Building investments in a DC world
In the latest Pensions Age podcast, Sophie Smith talks to USS Investment Management’s head of investment product management, Naomi Clark, about the USS’ DC investments and its journey into private markets