Are pension schemes ready to leave regulatory training wheels behind, and embrace a future of innovation? We discuss what’s changing as the millennial turns 36, and the digitalization goals yet to be achieved.
The world in which we live, work, and retire is rapidly transforming – industry distinctions that were once watertight, are becoming blurred. Where does your hardware network end and the cloud begin? When does in-house HR draw the line and pass the reigns on to third-party compensation solutions firms?
And when do we make the move from basic tools, to advanced technology?
Pension schemes sit on similar crossroads. Long accepted as the domain of large-scale employers and advisory firms, it’s only recently that employees have started taking proactive steps to secure retirement scenarios, with minimal hassle.
In an era when drones supply groceries in a matter of hours and one can invest and offload millions in cryptocurrency at the click of a button, protracted timelines are no longer acceptable. This ‘consumer-centric’ approach is percolating every aspect of the employee experience.
Recruiters are ‘marketing’ their companies and treating candidates like potential buyers. Pension schemes, too, must undergo a complete revolution – an outmoded system has individual employees making data entries, approaching HR personnel, being redirected to a third-party stakeholder, and aligning employer contributions to personalized plans.
When he leaves the company, the process begins all over again.
No wonder 69% consumersOpens a new window want to take matter into their own hands, managing their finances online. However, the market is yet to take a concrete shape and demand outstrips supply by a significant margin.
A MetLife report found less than 1 in 5Opens a new window users in the 55 years+ segment found online guidance helpful. The numbers are equally disappointing in case of employer-assisted models: only 24% employeesOpens a new window are offered financial education.
There’s also a gradual shift in career trends. **Unexpected retirement is more common than ever before – a survey saw that while 33% respondents intended to retire at 65, about 35% would leave the workforce by 60**. It’s essential, therefore, to be fiscally equipped and ready for the change.
**In the absence of intelligent and timely services, 56% employees regret not having invested in pension schemes when they were younger**.
Employers must realign pension schemes from a “pull-meets-push†perspective. The modern, experiential thrust demands better UX from iPhone apps to brick-and-mortar stores. Growing workforce, evolving skills requirements, and a dynamic economy are some of the factors driving a whole new focus on post-worklife scenarios.
How can technology rejig the landscape?
Rewind to April 2015 – the Freedom and Choice in Pensions mandate gave workers more control than ever before. From Defined Benefit (DB) schemes, companies transitioned to Defined Contribution (DC) plans where employees could access savings in a pattern of their choice.
One size did not fit all anymore – financial consultancy firms looked at new ways to handle the torrents of advisory requests pouring in. Employers were tasked with safeguarding their employees’ fiscal health without impeding flexibility.
Individuals needed to understand all available options and parameters to take the right call – that’s where analytics and interactive modeling comes into play.
“Consumer behaviors have evolved over the last seven years or so, following the introduction of the iPhone and related smart technology. This provides a fantastic vehicle to quickly distribute information in an easy-to-read format,†notesOpens a new window Capgemini’s Rod Bryson.
Equinity Pensions Solutions worked with technology partner Mubaloo to create an easy-to-use employee self-service portal that’d collate influencing factors and generate a range of possible outcomes.
“It allows employees to model after-retirement draw-down until their money runs out, using assumptions that can be changed around contribution rates, growth rates and even charge rates,†explained their head of product strategy, Robert Llambias.
Once familiar with the essentials, further aid is usually required – tailored to exceptional circumstances and needs. A typical conversation around retirement decisions lasts from 7 to 15 hours, before arriving at a genuinely actionable route. This process could be automated, effectively shaving off hours from this timeline and saving manual efforts.
Insurance provider LV=Opens a new window rolled out roboadvisory solution Wealth Wizards to address this challenge. Sessions dropped to a mere 50 minutes – the system then took 30 seconds to identify the best alternative, and spent another 50 minutes preparing the case file.
Innovations like this can solve the industry-wide advisory gap. In fact, Deloitte reported that around 15 million employeesOpens a new window in the UK were eager to opt for paid automated systems.
Kickstarting change: pain points and the way forward
Innovation in the financial segment has always been peppered with roadblocks. Stringent regulatory guidelines, for one, means solution providers must check a line of compliance boxes before implementing ideas. The high-stakes nature of the space means errors and lacunae come with a heavy price to pay.
John Broker from ITM remarksOpens a new window that several factors hinder pension program digitalization: “I think cost is a key barrier. There is an unwillingness to invest in technology, especially with so many companies struggling with budgets. The other is a lack of impetus.â€
“The pensions industry is quite slow at making any decision, largely because there’s a whole myriad of different stakeholders involved in that decision-making process,†addsOpens a new window PensionsFirst’s Ben Reid.
What helps, continues Reid, is a clear line connecting tech investments and returns from the revamped approach. That’s why new names in the pension business are focusing on real-world outcomes and a genuine value-add.
Smart Pension is about 3 years old, and already boasts a hyper-accelerated enrollment pipeline to help employees. Last year, it went head to head with established tech players like Oracle, Symantec, and IBM – bagging the prestigious Technology Innovation of the Year.
Interestingly, the recognition polls were opened to the public – a testament to the company’s high market adoption rates. “We are seeing a new firm enroll their staff every seven minutes. We are now helping more than 300,000 people save for their retirement,†saidOpens a new window co-founder Will Wayne.
Its MAF-accreditation also underscores the fact that successful solutions must keep their compliance bases covered.