When was the last time you received a bank statement in the post? Or visited a branch to pay a bill? In which year did you most recently queue up at a supermarket checkout with a cheque book and pen in hand?
Technology has helped finance evolve in many ways, yet the pensions industry has struggled to keep up.
Many technology systems - whether at insurance companies or pension providers, or in-house at large pension schemes - were built at a time when large operational teams were expected to use and complement them.
As a result, there was no need for the software to be enhanced to replace or to improve upon some of those processes. However, as soon as you start onboarding people onto that software, and as soon as you begin to store members' assets and data on there, it becomes very difficult to do two things, according to Sam Barton, Chief Technology Officer at Smart: "The first is to move or improve the data. The other is to alter the operational processes around the data and the day-to-day business processes." This is not just a problem when moving people between providers, but also often an issue within the same one.
Products launched in the 1980s, for example, will still be reliant on paper-based systems and old mainframe computers often located on-site today. The challenge of such a system is significant at the best of times but has been thrown into sharp relief during the COVID-19 pandemic and the nationwide lockdown.
Darren Philp, Director of Policy at Smart, notes that some aspects of pensions technology need dragging into the 20th century, let alone the 21st century. "We have seen a massive underinvestment in pension technology as a sector for a significant period of time," he says.
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.
So what does the future look like for legacy pension providers, and the pension experience overall?
Read Professional Pensions' exclusive guide, The Pensions Technology Trap, to learn more about how legacy systems, processes and policies are leaving pension providers behind, and one pension company that remains ahead of the game. Click here to access.