The UK pensions sector is in dire need of a technology revolution – and there are plenty of forces at play to push and pull the industry into the 21st century.
Generally, the world of financial technology is revolutionising how we interact with money, but not just through shiny new mobile apps for consumers. In almost every area of financial services, there are companies emerging with the aim of rethinking and reshaping traditional approaches.
But what about the pensions industry? Are they doing enough to keep up with the demand for digital pension services? It seems not.
For Smart's Chief Technology Officer, Sam Barton, a major barrier to change in technology software at pension companies is its culture. "Everyone focuses on legacy systems, but without acknowledging that there is a cultural piece that needs to change in order for the business to digitally transform," he says. "It's not just legacy software - it is legacy thinking that means firms are not making enhancements."
Too often, providers in desperate need of a system upgrade will introduce one new feature, such as a mobile app or fresh look for an online portal. But the processes behind the scenes remain outdated, labour intensive and unable to meet the expectations of customers. "Lots of people use the term ‘digital transformation'," Barton explains. "They say, ‘We're going to change our software, we're going to introduce a new product'. But without doing the same transformation on your ways of thinking and the people in your business, it's very difficult to introduce that seismic change.
Of course, getting members engaged with their pension savings is vital too. And most company leaders understand this: PwC's 2018 Pensions Technology Survey found that 82% of employers "recognise improving member communications as one of the main benefits of pensions technology" However, there is a difference between understanding the problem and acting on that insight. In the same survey, PwC found just 30% of employers sent notifications through an online platform, and only 36% sent communications via email. More than two thirds (68%) sent information to savers just once a year.
Engagement is key to ensuring that savers know how much is in their pot and how they can boost their retirement prospects - and the earlier they get to grips with this, the better. A strong technology proposition can help provide members with easy access to information and analyse how they use it to nudge them in the right direction towards increasing contributions and understanding their options.
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.