TMCnet Feature
February 06, 2020

PenTech Will Change How We Save For Retirement

The way that people save for their retirement right now isn’t ideal. Even though 2019 was a good year for equities, many pension scheme members feel that they could be doing more to provide a user-friendly service. Top of the list of priorities are things like better communication between pension trustees and employees, more control over pension strategies by clients, and better planning. So far, though, options have been limited.

That, however, may all be about to change with the advent of new and promising pension technologies. British professional services firm PWC believes that fresh, seemingly unrelated innovations will have a meaningful impact on the pension landscape, changing the relationship between pension managers, sponsors, advertisers, and scheme members. They see a more transparent future.

Here’s a discussion of the issue from Head of Pensions at PWC, Raj Mody:

The Need For Better PenTech

The pensions crisis is much worse than you think. Even a quick amateur-hour eye-balling of the economic and financial data shows that we’re in trouble. Here are some facts and stats to drive the point home:

  • Just half of employees have access to a 401(k) retirement plan, and only 40 percent of those participate in them.
  • Consumers are a record $4 trillion in debt
  • Around 16 percent of people are not at all confident in planning their financial futures
  • The median US retirement balance is $0 - meaning that more than half of people in work don’t have anything put away at all

Here’s how PenTech may improve the pensions landscape.

Pension Technology Will Improve Planning

Data from PWC suggest that only around 34 percent of people currently saving for pensions are willing to pay for professional financial advice. The rest are content to leave their money in the hands of equity management firms. The hope is that new Robo-advisors powered by artificial intelligence will be able to provide beneficiaries with genuinely helpful insights.

The ultimate realization of this technology is quite exciting. A pension holder, for instance, would be able to ask a Robo-adviser their best strategy for meeting a particular pension income goal based on an appraisal of their data. The Robo-advisor would then suggest a range of assets could buy or set monthly contributions.

Already, we see this kind of technology in action. Pension giant APG, for instance, is sponsoring tech firm Kandoor to develop a chatbot that will provide users with answers to financial planning questions, possibly through social media. The product, aimed to draw younger people into the pension market, is being hand-programmed by more than 200 experts to respond to natural language queries. The hope is that the bot will get away from the “professionalizing” of the industry and speak with beneficiaries in a language they understand.

I’m sure Get Claims Advice would agree, mis-sold pensions are a significant issue for both employees, regulators, and their employers. Traditional financial advisors often recommend products that ultimately wind up with their clients losing money. More often than not, these products are entirely inappropriate, given their circumstances.

Robo-advisors could provide beneficiaries with better advice while at the same time, cutting trustee risks. Presumably, any help these systems offered would come with a digital paper trail, justifying why they made the advice they did.

Pension Technology Will Enable Single-View Portals

The vast majority of internet investing platforms, such as IG and Hargreaves Lansdown, allow clients to view their net position from a single digital dashboard, seeing the value of their assets and return on investment.

Pensions, however, remain somewhat in the past, often providing clients with statements via the post. Data suggest, however, that more than 62 percent of people would welcome a portal offering a single overview of their current pension value.

There’s a new drive, therefore, to use digital tools to enhance transparency across the board. The technology to create online portals has been around for a while, but the desire to implement them at the corporate level has not.

Pension Tech Will Help Better Engage Employees With Their Pensions

In the introductory section, we pointed out that most people don’t seem to be actively engaged with their pensions. For some, the problem is not understanding how the system works, while for others, it’s the fact that there aren’t any easy-to-use tools. Basic pension technology should make it easier for people to assess their current pension position, automatically improving the fundamental level of engagement. An astonishing one in three employees has never viewed their pension balance online.

The Changing Nature Of Pension Savings

Pension technology is evolving to face the challenges ahead. In the future, pension service managers will offer user-friendly technology that enhances engagement. The hope is that we will see a reversal of cavalier attitudes towards pension pots and more participation by beneficiaries on the ground.

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