PDP urged to provide further clarity on estimated retirement income standards

The Pensions Dashboards Programme (PDP) must improve clarity on its plans for the method, accuracy and scope of producing estimated retirement income (ERI) for dashboards, according to the Society of Pension Professionals (SPP).

The organisation’s Administration Committee, which is comprised of representatives from major pension firms, has compiled a report which recommended that ERI must be seen as an illustration rather than a quotation, and stressed the importance of suitable caveats and scheme specific warnings.

It also called for ERI to be a retirement estimate based on savings as of the current date of calculation, which the report said would establish a figure for within, for example, 12 months of the date that it is quoted which excludes future accrual.

It noted that the range of members who could be quoted an ERI using the dashboards should be limited, leaving them unavailable for savers with unreliable data items or for whom special design features, such as step ups, would make formulating a meaningful ERI very complex.

The report added that, where ERI is calculated on an ad-hoc basis rather than being available directly via dashboards, the figures provided to savers should be done outside the dashboard environment to provide the highest quality information.

Additionally, SPP called on PDP to release the project’s liability model, arguing that schemes, providers and administrators would only be comfortable publishing figures for the dashboards when they understand their liability in relation to those figures.

It also requested that any approach adopted should be done so with the intention of not reviewing it for a number of years, leaving schemes with “the certainty that their investments will be time well spent”.

SPP former president, Paul McGlone, said: “We remain very supportive of the pensions dashboard, and it is extremely helpful that the timescales for delivery are becoming increasingly clear. However, other aspects of the dashboard rollout remain unclear and estimated retirement income is one particularly under-defined area.

“Our proposals on the calculation of estimated retirement income for defined benefit schemes aims to encourage informed debate as part of the dashboard rollout, and lead to an early and definitive decision by the Department for Work and Pensions and PDP on the methodology and scope involved.”

This is not the first time that ERI has been highlighted as an issue for those contributing to the dashboard project, with LCP warning in July that data requirements, such as the decision to "go live" with ERI expressed to members, could delay the launch of the project.

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