The days of paper-based banking are numbered, and the way we interact with our finances is increasingly digital. The pensions industry is struggling to catch up with technology.
For a generation of people now used to mobile and online banking - and even paying in shops, bars and restaurants using smartphones - methods that were common just a few years ago seem antiquated. This same generation is the first cohort that will save for their retirement predominantly through defined contribution (DC) auto enrolment vehicles. The experiences they have with their banks and other service providers will lead them to expect the same from their pension. They want to access their balance quickly and easily, and the ability to make changes to their investments and contribution rates at the touch of a button or tap of a screen.
Yet the pensions sector is decades behind most of the financial services industry in terms of technology. For many providers, communications are still paper-based. Online platforms are slow. Legacy systems like these are a lead weight around the necks of many pension providers, and their lack of flexibility threatens to disengage and disillusion millions of savers for whom understanding their savings will be vital to their long-term financial well-being.
As pension providers have grown through expansion, acquisition or a combination of both, older systems have been abandoned due to the huge costs involved in migrating them onto new models. When upgrades or repairs are required, some have had to bring staff out of retirement to help with the work, as the expertise needed to operate the systems has not been retained or passed on.
How did we get here?
Read Professional Pensions' exclusive guide, The Pensions Technology Trap, produced in association with Smart to learn more about how legacy systems, processes and policies are leaving pension providers behind. Click here for access.