Pension provision is an area of the financial services industry that has been largely bypassed by the digital revolution transforming the way millions of consumers manage their money.
While bank customers can use their smartphones to check balances, transfer cash, or even instruct an app to make payments, pension savers are still scrambling to manage their accounts in an often cumbersome, paper-based world.
But all this is about to change as insurers pour millions of pounds into bringing pensions into the 21st century, seeking to engage a new generation of savers who are more tuned into Pokémon Go than piggy banks.
“Our industry is in the stone age,” says Alistair McQueen, savings and retirement manager at Aviva, a leading UK pension provider.
“The pressure has been healthily turned up on our industry and we now have to step up to the game.”
Across the country, pension providers are making hefty investments in digital innovation as they seek to engage a new crop of customers who eschew paper statements and brochures and demand more convenience and interaction from their service providers.
Mobile phone apps are being developed so customers can check their pension balances wherever they may be.
Technology employed in the banking sector is being harnessed in the pension arena, with customers to be offered personal indentification numbers, or fingerprint recognition, to access their accounts, dispensing with the often frustrating need to have lengthy passwords or pension policy details to hand.
At the click of a button, savers of the future will be able to transfer their pensions with ease, and no longer have to endure paper-based administration which can take weeks to process. On the horizon, there are government plans for a digital “dashboard”, so savers can see all their pensions in one place.
“People from all walks of life are embracing digital technology in every aspect of their lives, from online banking and ordering taxis, food and clothes to measuring how many steps they take in a day,” says Kate Smith, head of pensions with Aegon.
“Customers expect to be able to deal with financial matters online, including pensions.”
UK slow to turn on to tech
In recent years, a plethora of interactive tools such as retirement income modellers and calculators have been made available to pension customers.
Technological innovation in the advice sector is also offering pension savers lower-cost help with their retirement planning decisions, through so-called robo advice.
But the winds of digital change have not blown much harder on the pension sector, unlike other areas of financial services.
This contrasts with other countries, such as Australia, where, at the touch of an app, savers can use mobile phones to check their superannuation accounts, or make contributions.
While flipping sausages on the barbecue, Aussies can also consolidate various pension pots using their smartphones.
Some superannuation apps even allow savers to place footy tips — a popular sports betting activity for many Australians — at the same time as they check up on their super pot.
“In Australia, we are mostly concerned with young people engaging on consolidation of accounts, knowing their balances, contributing extra where they can, especially in connection with time out of the workforce and gender pay gap issues,” says Jeremy Cooper, an Australian-based retirement income expert.
There are several reasons why the UK has been slower to jump on the pensions tech bandwagon, compared to the industry Down Under.
“This is really a legacy from final salary schemes, where there was little need to engage the scheme member and the outcome was pre-determined,” says Andrew Tully, pensions technical director, at Retirement Advantage.
“Plus, the fact that most people only really engage with their pensions when they are approaching retirement, typically age 50 or older, means that the primary audience has not necessarily wanted to do things digitally.”
However, this is all changing. The mass auto enrolment of savers into new workplace pensions, where individuals are left to make decisions about how they want their money invested, as the recent pension freedoms, which gave over-55s full freedom to spend their savings as they wish, are having an impact and creating more demand for engagement.
“Prior to the pension freedoms, when most retirees were either in line for a final salary pension or were simply shoehorned into an annuity without any consideration of the alternatives, the need and desire for technology solutions was somewhat limited,” explains Andrew Pennie, head of pathways at Intelligent Pensions.
“It would have only been seen and used by a minority, usually those taking specialist advice.”
Demand for innovation
Driven by expectations of increased demand from more technology savvy customers, pension providers have already begun to up their game.
Scottish Widows, the pension provider which is part of Lloyds, the UK’s largest retail banking group, is spending £50m on bringing digital innovation to customers.
“Our research has shown that there is a real desire from our customers to interact with us in the same way they do with banks,” says David Holton, director of corporate propositions, pensions and investments with Scottish Widows.
“As part of the Lloyds Banking Group, we can see what has worked well on the retail side and what might work well for pensions.”
Scottish Widows is working on offering its customers Pin access to online pension accounts, which helps if policy details are not to hand. Pension transfers are also being cut from weeks to days, thanks to online technology.
The provider is also adapting how it presents key pension information so it is more suited to a digital-first generation, which prefers mobile-friendly bitesize chunks.
“Millennials don’t do reams and reams of paper,” says Mr Holton.
Aegon, another pension provider, is working on the next version of its Retire Ready online dashboard. Customers signing up to Retire Ready already receive email notifications encouraging them to review their pension and Isa savings and take action.
“Our next step is to build a mobile app, incorporating the latest technology, such as fingerprint recognition,” says Ms Smith
Aviva, one of the country’s leading pension providers, is investing £100m in its Digital First strategy.
The provider has this month launched a new app, Shape My Future, which aims to help its customers visualise what their retirement lifestyle will be like, based on their current savings levels. The app can be shared on social media — a quantum leap for pensions.
“Digital technology gives people super powers,” said Charles Reeves, global digital product and design director with Aviva.
“If we can give our customers a vision of the future, and insight, to help them make better decisions, then we have given them a leg up. That is a real set of superpowers.”
Making a game of saving
The government has also switched on to the transformative power of financial technology and is supporting efforts by the pension industry to create a digital hub where savers can see all their pension pots in one place.
By 2019, it is hoped that a digital pensions dashboard will allow savers to view and compare all their pension pots at the touch of a button.
“Technology, like mobile phone apps, has made day-to-day banking easier than it’s ever been,” says Simon Kirby, the economic secretary to the Treasury. “It’s time for pensions to catch up.”
Experts believe that gamification — the application of game playing to encourage engagement with a product — could be used more widely to help motivate the young to save for retirement.
“Gamification is one of the most effective ways to make otherwise complex material interactive and engaging,” says Keir Macdonald, analyst at Redington, a pensions consultancy.
“One only has to look at how it has taken off in other areas of life to see its effect — one of the best examples being personal fitness with FitBits and Jawbones.”
“If you haven’t yet heard of ‘gamification’ don’t worry: you are not alone,” he adds. “But it might just be something that is about to enter the lexicon of UK pensions jargon.”