Pensions have long been the Cinderella of the finance sector, left behind as other elements have steamed ahead in their use of technology. The advance of auto-enrolment, however, has meant providers and employers have had to make better use of technology, both from an administrative perspective and also to engage employees and ensure they understand and make the most of the benefit.
Gethin Nadin, chief innovation officer at Zellis, believes this has served to simplify the pensions process for employers. “Automatically enrolling employees based on predefined criteria and eligibility has significantly reduced employer administration, while making it easier to be compliant,” he says. “We have also seen much better benefit and payroll integrations, higher-quality data analytics and reporting, and integration with broader financial wellbeing strategies.”
For employees, better technology means tools that are simpler and easier to use than traditional pension systems. “Real-time access to pensions through apps and online dashboards has been a game-changer,” claims Neil Hugh, head of workplace proposition at Standard Life, part of Phoenix. “Technology has allowed members to engage more easily with their pensions – from updating their details to changing their investment selection – with little or no employer intervention required.”
Yet there is still room for improvement, believes David Bird, head of DC platform at NOW: Pensions. “Self-service capabilities are the most important feature that technology can deliver for pension scheme members,” he says. “This will give them what they want, when they want it, helping members connect better with their pension savings. But the industry is lagging behind the curve, and it is jarring for members to compare how they interact with their pensions provider to how they manage other aspects of their personal finances and household utilities.”
As well as enabling employers and employees to manage schemes more efficiently, technology is also helping to get members to engage with pensions. Sam Holmes, head of financial coaching at the financial wellbeing firm Bippit, says automated reminders, targeted messaging and multi-channel communications all contribute towards boosting pension awareness for members.
“Conscious activity on pension platforms makes the long-term savings feel more real for individuals,” he says. “Nudges to log in and review statements, understand what is happening and reminders that all personal pension members are, by default, investors can help to engage large employee groups.”
One area that is starting to gain traction is that of gamification. Vito Faircloth, chief digital officer at Isio, says this can be used as a reward for employees responding to nudges to complete applications or other actions. “This can make pension and wider finance-related activities more engaging and enjoyable for members,” he says. “It is rewarding, fulfilling and motivating to know that you are on track with your finances. Gamification can play a large part in provoking these feelings and positive actions from consumers.”
James Borshell, senior employee incentives solicitor at Harper James, also believes gamification can help encourage employees to engage with pensions. “If a saver knows that there are rewards available for checking their pension pot against their preferred metrics at reasonable intervals then the likelihood that they’ll keep their investment choices current, engage with the resources provided and thereby enjoy a better standard of retirement is greatly increased,” he says.
Another growth area is video benefits statements, which can help people engage and assimilate information more easily than traditional paper or email communications. “Research by 3M recognises the astonishing speed at which the brain processes visuals – some 60,000 times faster than it does text,” contends Anne Lawson, employee benefits consultant at Acumen Employee Benefits. “Demystifying a complex concept such as pensions with an interactive video benefit statement can really improve understanding.”
Despite many delays, the government still intends to roll out its long-awaited pensions dashboard in the coming years, which will also help employees to bring all their pensions – including state provision – together in one place. “With many employees averaging 11 different pension pots over their working life, a dashboard like this is much needed,” says Nadin. “However, many private companies are making a success of finding old pensions and bringing them together in one place. Being able to add the state pension to this would complete that circle.”
There is a risk that the government may effectively miss the boat, though, following the recent announcement that the first connections will now not be made until 2026. “This provides an opportunity for private enterprise to step up and offer more compelling pensions experiences, which may see more employees extract workplace savings and move them into consumer apps,” adds Nadin.
Holmes also believes the use of mobile app technology will start to be applied to workplace pensions. “This will enhance the user experience of managing their pension in real time, with online calculators and real-time tailored support,” he says. “We may see the introduction of blockchain technology to help with security and transparency of transactional pension data, which will positively contribute towards building more trust with pension members.”
Having more effective technology, whatever format this takes, should be good news for both employers and employees, believes Pete Hykin, CEO and co-founder at Penfold. “Firstly, simplified schemes reduce administrative complexity, saving time and resources,” he says. “Secondly, when employees have a better understanding of their pension plans, they are more likely to appreciate the benefits offered by their employer and feel valued. Lastly, a workforce that understands pensions is better equipped to plan for retirement, reducing the likelihood of financial stress among employees and potential reliance on employer-funded retirement benefits.”