Pensions poised for change

With open banking at the forefront of the government’s digital finance strategy, pensions are on the brink of massive change. It’s important not to underestimate the scale of the challenge, the size of the gap that needs to be bridged, and the impact the changes will have on society. 

Savers are thirsty for pension digitalisation. New research shows people nearing retirement age are supremely comfortable using digital technology for finance decisions and transactions: for example, 83% use online banking. But only a third even have the option to engage with their DB pension digitally - and this is something that 63% of them want. As a result of the pandemic, there’s an increased desire for digital engagement: just over a quarter are now more comfortable with the idea of engaging with their DB pension online than they were pre-COVID.

What’s the bigger picture?

There’s no question that pensions digitalisation is behind the curve, against a background of legislation that’s outdated at best. The current disclosure regulations were drafted in 1996 and the latest primary pensions legislation came into effect in 2006 – a year before the iPhone, that computer in our pocket, was launched.

Looking on the bright side, that means there’s everything to play for. So where should busy pension administrators be aiming their time, energy and resources?

Getting set for transformation 

Some commentators believe that a change in mindset is the most critical driver of transformation. They argue that many standard service level agreements (SLAs) were created long before computerisation and it’s common to see timelines of days or even weeks to turnaround basic queries – not quite a digital-first approach. Others believe the industry can build on the success achieved during the pandemic, when pensions administrators saw just what could be achieved online. Still others believe the key is – once and for all – answering that eternal chicken or egg question: should we focus on driving members to the site or making sure there’s enough for members to actually do online in the first place?

Actually, I think they’re all right! The pandemic has both changed people’s expectations of what can be achieved virtually and shown the industry that innovation really is part of our DNA. And forget the chicken or the egg – a combination of nudge factors and online empowerment is vital for successful digitalisation and faster service. Focus on both engaging members and making sure there are actions for them to engage with. Both take effort and investment, of course.

Agreeing what’s 'good'

Perhaps the best starting point is to create a collective vision of what 'good' looks like for our industry. In my book, that’s worry-free online services, with the ability to speak to a human for big decisions. It’s embedding trust in the system – that means going further than simply using the latest biometrics, important though that is, and future-proofing our systems ready for the next generation of innovation in identity security. And it’s about developing online services that go further than changing an address or marital status. Members deserve clear, accessible information so they can have a full picture of what their future retirement might look like. Increasingly, this means bringing DC and DB memberships together on one dashboard.

It’s a huge challenge. But it will be worth it. 

Want to find out more?

Catch up with our recent panel webinar on the future of pensions administration.

Don’t hesitate to contact me or the team if there’s anything you’d like to discuss.