The UK pensions industry and the rise of open data sharing ecosystems

Nick Caley, VP of UK and Ireland at ForgeRock, explores how the UK pensions industry is paving the way for open data sharing ecosystems.

As consumer expectations around digital services increase, businesses across every sector are looking to meet a growing demand for better, and more user-friendly, applications of data. The Covid-19 pandemic has only accelerated this shift to digital as traditionally offline activities move online, and businesses are racing to stay ahead of both their customers and their competitors. The UK pensions industry might not seem an obvious place to look for inspiration about how to adapt to digital transformation, but that might be about to change.

With as much as £20 billion sat in lost pension pots, there is a real and pressing need to reconnect people with their savings, particularly during the current economic environment. The government hopes that a pensions dashboard — a simple interface for citizens to monitor and manage multiple pension pots from a single platform — will provide the answer.

Creating a single interface for people to monitor and manage their pension savings wherever they are and whoever they are managed by would be no small feat. The typical British worker can accumulate up to 11 separate pension pots by the time they retire, and there are no less than 40,000 pension schemes operated by some 300 providers in the UK. But the technological advances being made in data sharing and security mean this is no longer an unrealistic ambition.

Not only that, but if the pensions dashboard can be built and deployed successfully, it could become the new standard for the wider financial services industry – not just in the UK but around the world — and become a template for how the same principles could be applied to Open Finance more generally.

But how close are we to seeing the pensions dashboard becoming a reality? What are the technologies and principles behind it? And how could it make the UK a leader in Open Finance?

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UK pensions dashboard: Pot of gold at the end of the rainbow?

There have been multiple delays to the pensions dashboard since the project first began in 2016. However, this year it has been moving much closer to reality than ever before, reflecting a growing appetite from government and regulators to collaborate with the UK fintech sector.

The new Pension Schemes Bill released by the government at the start of the year includes a dedicated section outlining a framework to support pension dashboards, and compels pension schemes to provide accurate information to consumers.

Progress is also being made on an industry level. The Money and Pensions Service (MaPS) Industry Delivery Group (an independent steering group responsible for developing the required data standards, technology and governance to enable pensions data to be made available via dashboards) is well on its way towards drawing up a robust delivery model with the appropriate governance.

While this progress marks a shift from previous years, crucial questions still remain, such as: How should the deployment be phased? How will dashboards be officially evaluated? How will the project engage with government procurement rules? Crucially though, the technological solutions have progressed even further.

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The tech that could make the pensions dashboard a reality

A successful pensions dashboard requires three vital elements: trust, ease of use, and security. These pillars are essential if UK citizens are to incorporate the pensions dashboard into their busy lives, while safely and responsibly accessing the nation’s pensions data.

The User Managed Access (UMA) model is one authorisation protocol that makes this possible. It allows individuals to be highly specific about what information they share, who with, and under what circumstances, while making it easy for users to revoke access whenever they choose. This capability is crucial to putting the human at the centre of the design.

A robust foundation of pensions data – one that can always turn up correct results when searched – is also critical. While the datasets held by most existing providers in the UK are in need of improvement, a federated digital identity solution could link users’ digital identity and attributes together across multiple, unrelated identity management stores, consolidating citizens’ records into meaningful profiles. By providing critical OpenAPI security, consent capabilities, and a consistent user experience, a robust, modern identity system based around UMA will allow different pension data sources to work together harmoniously and securely.

A prototype phase has already been completed by the ABI, with a Pensions Dashboard now proven to enable an individual to access the details of all of their pension savings, including their State Pension and final salary schemes. This prototype has been a crucial step in confirming that adequate levels of security and governance can be provided for the sensitive personal information being shared, which ultimately depends on having a robust digital ID verification process. Now the technology has been shown to work successfully, the Department of Work and Pensions is confident to provide state pension information to a Pensions Dashboard.

There is still much work to be done to deliver an effective pensions dashboard, but these technological advances can show the wider UK finance industry what a wider Open Finance initiative could look like. If delivered successfully, the pensions dashboard would help to establish the UK as the new leader in the kind of innovations that would allow consumers to take back control of all their financial data and enshrine data ownership as an economic right.

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Open Finance and the open data revolution

While some questions remain over how the regulatory standards from the pensions dashboard and Open Banking (a separate regulation focused on building transparency and open sharing into the banking industry) can be applied to a wider Open Finance initiative, the pension dashboard’s architecture – federated digital identity, UMA, and interoperability through secure Open APIs – provides a viable model for Open Finance.

Crucially, these technologies conform to open standards, meaning the architecture that underpins them can be updated and synced with any new technology, preventing the formation of any legacy systems and allowing for consistent innovation. When adopted across the financial services ecosystem, they would create a variety of secure, trustworthy, and user-friendly tools that would empower users to engage more meaningfully with their finances.

Picture it: financial advisors and brokers could deliver important financial advice more completely, immediately, and visibly through the kind of seamless user experiences that are currently the preserve of digital native sectors. Users would have the option to see the entire history of every financial product they own, and switch financial advisers, banks, investments, and insurance providers all from a single interface. And they would be able to do all of this with the knowledge that their money and data is protected by the highest security protocols.

A reassuring future

Providing people with more control over their savings has never been more important as we now head into an uncertain economic future. And it seems fitting that the nation which gave us the world’s first postal savings system is now aiming to become the first to provide citizens with a pensions dashboard that will allow them to save for retirement conveniently and securely.

And if the pensions dashboard can lead us to a wider adoption of Open Finance then it would be a real boost for the UK’s fintech sector and a true gamechanger for consumers; one that would democratise access to financial services, create better competition between providers, put people back in control of their financial data and firmly establish the UK as the clear leader when it comes to innovation across financial services.

Written by Nick Caley, VP of UK and Ireland at ForgeRock

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