Pensions Industry Must Take Data Seriously

Customer data is the pensions industry's "elephant in the room", say experts at the Pensions and Lifetime Savings Association annual conference

Hannah Smith 21 October, 2019 | 11:41AM
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The imminent introduction of Pension Dashboards is forcing pensions firms to think seriously about how they handle customer data.

The quality of customer data in the pensions industry and the way it is managed is "simply not good enough" and needs significantly more investment, according to Margaret Snowdon, president of the Pensions Administration Standards Association (Pasa).

Addressing pensions professionals at the Pensions and Lifetime Savings Association (PLSA) annual conference in Manchester last week, she said the industry must work harder to improve its data handling. 

“The one big elephant in the room is data,” Snowdon told delegates. “It is simply not good enough. Some people actually fib about the state of their data quality, and others don’t know what their data quality is. I don’t think the data we use is good enough for good pensions administration, and I don’t think it’s good enough for pension dashboards either.”

Data and the Dashboard

Part of the impetus for better handling of customer data by pension schemes should be the pensions dashboard, she suggested. The dashboard is the government’s planned digital interface through which people will be able to view all their pensions in one place, ideally with real-time updates. First announced in the 2016 Budget, the first of multiple dashboards was slated to come in this year, but industry commentators do not expect it to be ready even by 2020. 

Helen Dean, chief executive of government-backed workplace pension scheme Nest, said the project has sharpened the focus on data quality. “If we are going to make this dashboard work, the most difficult and more important issue we will have to crack is data. We are all going to have to think about how we clean up our data and standardise the way we use it. I think it will be a real issue for 2020.”

She would like to see pension schemes checking on the validity of customer data in the way that banks do, asking customers to tick a box confirming their address or email is still correct, for example. But she noted auto-enrolment pension schemes can’t validate data with members directly or they would flout the law, so working with employers is the best they can do.  

The coming year will see “big strides” in data, whether encouraged by carrot or stick, Snowdon predicted, noting that regulators are already warning schemes to get their houses in order. Earlier this month, the Pensions Regulator ordered trustees of 400 pension schemes to urgently review the data they hold on their members or potentially face action including fines. The regulator said it thinks these schemes have failed to review their members’ data in the last three years. The move is part of a drive to raise governance standards and deliver better outcomes for pension savers

Snowdon has calculated the industry will need to spend £25 million over four years to get data “up to scratch”, but added it is not clear where this money will come from. Improving efficiency is one way the industry could save money to put towards better data management. Although Snowdon said while some pension schemes are becoming more efficient, using technology such as biometrics, automation and artificial intelligence, progress as a whole is slow. “We’re nowhere near as efficient as we need to be – we’re probably 30% behind a lot of the market out there. We charge more and spend more than we need to and we must address that,” she said. 


The way pension schemes safeguard their members’ data will also need to improve in order to avoid cyber threats, although many are already investing heavily in security. With such a huge amount of money held in pension schemes, they are very attractive to cyber criminals. Nest, for example, holds data on eight million members. “The data itself has a considerable street value so the responsibility is on us to hold that information safe and secure for our members and it’s something we all have to take really seriously,” said Dean. “It is something that is worth spending money on.” 

Bill Galvin, group chief executive of the Universities Superannuation Scheme (USS) said his organisation is very aware of these risks, having already blocked a number of attempted hacks. Whenever my IT team wants to scare me, they show me a list of all the things they have blocked from coming into our systems, and it is quite sobering,” he said. “This data needs to be held in organisations that can run it properly, secure it and manage it and understand the responsibilities in that space. Pensions at its core is a data business. The data is the fundamental thing for getting everything else right.”

Bad Transfers and Scams

A persistent problem in the pensions space is the prevalence of scams. The average size of a pensions scam is £82,000, with around 18,000 people affected by such frauds, which Snowdon described as “outrageous”. She argued that sharing intelligence between schemes could help protect members from scams, but pension providers can’t do this because of legal barriers. Scheme administrators are afraid to talk to each other about scammers “in case we get sued”, so it remains a difficult problem for the industry to tackle. 

Inappropriate pension transfers are also still a huge issue, with £60 billion worth of transfer values requested since 2016. Around 210,000 people transferred £34 billion out of defined benefit schemes last year. “Of that, research has shown that probably about £1.5 billion has gone to a dodgy arrangement or a scam, that’s scary stuff, and we need to do something to stop that,” Snowdon said. But she noted pension scheme providers must carefully balance the customer's right to transfer a pension with their own duty of care to protect pension scheme members from harm. Pasa will publish a new code for the industry on defined benefit transfers next year.                                    

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Hannah Smith  is a freelance financial journalist

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