FCA consults on regulatory framework for pensions dashboard services

The Financial Conduct Authority (FCA) has launched a consultation on the proposed regulatory framework for pension dashboards operators, confirming that firms will be able to offer additional services, provided they meet "rigorous conduct standards".

As part of this, the FCA outlined its intended approach to supervision and enforcement for dashboard operators, including on fees, regulatory reporting, record keeping, prudential requirements and conduct rules.

The watchdog explained that the proposals aim to strike an appropriate balance between protecting consumers and harnessing the opportunities dashboards create to engage savers with their pensions, stressing that the "balance is a delicate one".

In light of this, and while recognising that legislation bans firms from charging consumers to view their pensions information on a pensions dashboard, the FCA has proposed allowing pensions dashboard operators to develop a range of business models that add services beyond the core ‘find and view’ function of a pensions dashboard.

This could include investment advice, including robo-advice, or guidance, as well as providing models, calculators, and other similar tools.

However, such services will only be allowed where they have the potential to improve pension outcomes, and meet rigorous conduct standards.

The proposals also include "clear expectations" for the online journey a firm provides to a consumer and restricted how firms can use a consumer’s data, in an effort to help users can trust these online pensions dashboard services.

To further support innovation in the interests of consumers, the FCA also proposed framing its requirements primarily in terms of outcomes, rather than as prescriptive standards.

For instance, the watchdog suggested that an indicator of success will be that supervisory or enforcement interventions are rarely triggered, and complaint volumes are low.

The FCA also committed to keeping the regime under review in future, confirming plans to gather data to assess changes in the evolving market, identify issues and take appropriate action on any potential poor conduct or other market risks.

Indeed, the FCA noted that this is a new market, suggesting that "a range of business models may emerge that could improve consumers’ engagement with their pensions".

"We foresee that PDS firms may wish to make their dashboard services more widely available by entering into arrangements with third parties, who in turn may wish to make dashboards accessible to their customers, employees or members, for example," it stated.

"It is our understanding that the regulated activity will allow for such arrangements while ensuring clear regulatory accountability of the dashboard operator."

The FCA aims to publish its Policy Statement and finalised handbook rules in Summer 2023, with the authorisations gateway expected to open shortly after the rules are finalised.

FCA executive director for markets, Sarah Pritchard, stated: “Pensions dashboards will give savers better access to their data, helping them make better decisions for their retirement. Our proposals will encourage innovation while ensuring that we have the right rules in place to protect consumers.”

Industry experts have welcomed the consultation from the FCA, with People’s Partnership director of policy, Phil Brown, suggesting that “at first glance, the FCA’s proposals will focus the dashboards initiative on engagement with pensions and ban explicitly commercial uses of third-party dashboards”.

“The FCA is right to put consumer protection first,” he continued. “Commercial use of pensions dashboards, including dashboard enabled transactions, should only come when customer behaviour on pension dashboards is well understood.”

Adding to this, Broadstone pensions dashboard delivery manager, Jon Pocock, emphasised that while pensions dashboards have the power to improve member engagement, “providing the mechanisms for dashboards could leave the individual vulnerable to harm unless the regulatory framework is robust and balanced”.

He stated: “The FCA consultation on their proposed regulatory framework provides potential dashboard providers, pension providers, schemes and other interested parties the opportunity to provide views on how those controls should be established.

“Alongside the design standards that the Pensions Dashboards Programme (PDP) is developing, the framework should provide clarity on what dashboards are permitted to do with the data provided and ensure consistency between different dashboard providers.

"This is critical to give schemes confidence on how individuals will see information and how it is being utilised.”

The Pensions and Lifetime Savings Association (PLSA) has also welcomed the consultation from both the FCA and the PDP, although it emphasised that, once the rules and standards have been confirmed in the summer of 2023, it will be “essential” for these to be thoroughly tested in practice, with real savers viewing their real connected pensions.

The PLSA explained that such user testing could either confirm the efficacy of the rules and design standards, or indicate where they need to be refined prior to the widespread launch of dashboards, suggesting that this testing phase could last until at least summer 2024.

PLSA director of policy & advocacy, Nigel Peaple, stated: “The publication today of draft rules and standards which qualifying pensions dashboard providers must adhere to are a welcome next step towards making dashboards a reality. Industry and consumer groups will need to assess the proposals in detail before feeding back on the consultations.

“However, it is essential that dashboards are safe for savers so, now, more than ever, everyone should focus on doing dashboards well rather than quickly.

"Even after the new rules and standards are settled in the summer of 2023, extensive user testing will be required to ensure they work in practice. We anticipate at least 12 to 18 months' of user testing will be needed from the summer of next year before dashboards can be launched to the public."

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