FCA proposed Regulatory Framework for Pensions Dashboard Service Firms - Which? response

Summary:

• Which? welcomes the FCA’s proposals for the regulation of pensions dashboard service (PDS) firms. For pension savers to be able to harness the potential benefits and opportunities that pensions dashboards will bring, it is crucial that they are protected when using dashboard services. We therefore welcome proposals to require PDS firms to provide dashboard services that will facilitate individuals’ understanding of their pensions and further engagement, while also delivering strong, consistent levels of consumer protections across all find and view and post-view services.
• We support the balance the FCA aims to strike in its proposals between protecting consumers and encouraging innovation from PDS firms. Allowing scope for innovation in the regulations will enable PDS firms to develop dashboard services that engage consumers, whilst also ensuring that users are presented with the minimum information required to safely navigate dashboards. However, there are areas within the dashboard user journey where the potential for consumer harm is greater. Hence, the FCA must carefully oversee risk in these areas in particular, and if there is evidence of consumer harm, make informed changes to its rules quickly to ensure all consumers are appropriately protected when using dashboard services.
• There must be a strong, cohesive supervisory and enforcement approach from all bodies involved to ensure that all firms are compliant with relevant regulations and standards. The DWP, FCA, PDP and The Pensions Regulator (TPR) must work together to ensure that all relevant regulations and standards are being effectively enforced and complied with by all participants, and that any breaches or misconduct by firms are addressed consistently. A joined-up approach is critical when considering the number of different participants across the PDP ecosystem, as any gaps in the regulatory framework could pose significant risks for dashboard users.
• We support the FCA’s proposals for disclosures, signposts and warnings. Requiring PDS firms to clearly communicate key information to users on the nature of dashboards and the limitations of view data, whilst also giving them flexibility in how they word and format these communications, will help ensure that consumers understand the messaging displayed on dashboards and are aware of the service functions and limitations. User testing should help PDS firms determine the effectiveness of their disclosures, signposts and warnings, and how often these should be displayed on dashboards.
• We support the FCA’s decision to allow data export to the user and PDS firm only. Placing restrictions on providing data export will allow users to benefit from exporting their pension information, and also make sure that both the user and regulator maintains control of where the individuals’ data is being exported to and how it is being processed. Given the significant risks involved in exporting data, the FCA should monitor disclosure warnings for data export and include more standardised wording if required to mitigate any potential harm.
• We support the inclusion of post-view services. The proposal offers PDS firms the opportunity to create innovative post-view services that build on the find and view data presented to users on dashboards, facilitating user’s engagement with their pensions whilst remaining within a FCA regulated environment.
• We do not think that a dashboard user’s journey will always be as contained as the FCA seems to suggest in its proposals. We have some concerns about the onward journeys of consumers after using post-view services. There is a possibility that PDS firms may encourage users of their post-view services to look at a certain pension product or service on their own website, which could potentially present added risks for consumers, but it is not clear from the proposal whether this onward journey would fall within the FCA’s regulatory scope. The FCA should consider where its responsibilities lie on this, and if it would be able to effectively oversee these onward journeys.
• We strongly support the FCA’s proposal to not permit marketing of any products on all dashboard services. Given the potential harms that could arise as a result of permitting marketing on dashboards, from consumers making poor investment choices to falling victim to fake advertisements and scams, it is vitally important that the FCA maintains its position on marketing in its final rules.
• The FCA should prioritise supervising PDS firms in overseeing the compliance of third parties. We support PDS firms having responsibility for the actions of third parties, especially given that third parties do not need to be FCA regulated firms. However, PDS firms who have made their dashboard available to other firms may be responsible for several third parties' compliance with FCA rules, which could pose significant supervisory challenges for PDS firms. Thus, the FCA should prioritise overseeing PDS firms’ supervision of third parties, and intervene in instances where a PDS firm is not properly monitoring compliance.