During the past year we’ve witnessed rapid transformation across the UK workforce, with at home and online working now the norm for the majority of office-based businesses.
While adapting has been a challenge, it’s also given companies the chance to reflect on their values and use the pandemic as an opportunity for positive disruption.
The pensions industry is steeped in tradition, but like other sectors, it now has the chance to harness new innovations and examine how it can continue to meet people’s needs as their priorities change.
In the past, the pensions industry has been wary of offering advice to customers, for fear of breaching regulations. Pensions often appear overwhelming and people can get lost in the documentation of complex products and terminology, without understanding the most important elements. The temptation has been to supply customers with extensive paperwork, to ensure they have absolutely everything they need. Now it’s time for the industry to find a balance between supplying the details and ensuring that people get bite sized-chunks of information, to help them to make decisions around contributions and investments that will best suit their lifestyle.
Start-up banks have been successfully using technology to launch simple and engaging platforms for customers over the past few years. While people were previously wary of using new online banking tools due to the risk of scams, confidence is rising and these options are gaining popularity. The pensions industry can use similar technologies to its advantage, for the benefit of customers as well as providers. With the right support, the pensions industry can use the growing range of apps and artificial intelligence devices to display products in a way that’s consumer friendly and engaging. By demonstrating key information about products through apps, it could solve some of the challenges with member engagement. There’s also been a rise in demand for mobile pension strategies, to better allow digital sharing of information.
In addition to emerging technologies, other changes are afoot. The jobs market has seen massive overhaul in the past year, with previously burgeoning sectors like entrepreneurship, self-employment and the gig economy accelerating at pace. These new, flexible ways of working are especially popular with younger generations, many of whom have portfolio careers and a wide range of different income streams.
To succeed, the pensions sector will need to adapt to these new ways of working. This could include changing the way pensions are invested, for example enabling payments to be made in line with fluctuating income, rather than a standard monthly payment. It could also focus on the right marketing, to make the prospect of investment seem exciting to younger audiences. With economic pressures hitting hard, many young people won’t see retirement as something that’s within their grasp. Pension companies could consider rebranding as a long-term savings or investment scheme that people can dip into when they need support with major life events. Defined benefit schemes manage much of the investment and risk on behalf of members, but for defined contribution arrangements the responsibility shifts to the individual. While pensions advisors can share information about risks, only a consumer can decide what’s right for them, and they need a scheme that’s personal to them. The same is also true for the older generation. One person in their 60s might be keen to use their pension to start retirement, while another might see it as an opportunity to launch a new start-up business.
Ultimately, it’s important that the industry doesn’t make assumptions about people’s needs, whether young or old. It’s easy to second guess what’s needed, but without adequate research the sector could risk spending millions on overhauls that are unpopular or unfit for purpose. Other industries are successfully utilising data to mould their products and services to customers’ needs. This is something that the pensions sector should be exploring further, so that it can better tailor offerings to the market.
It’s also crucial that the sector works directly with different generations to determine what will ignite their interests. For example, a Nielson report found that more than 70% of millennial consumers will pay more for products and services from companies they consider to be sustainable and in line with their ethics. If pension scheme managers could demonstrate how and where investments are making a difference to local communities for example, customers might feel more positive about them in the short term. When it’s money out of sight and locked away for an indefinite period of time, it becomes extremely difficult for people to engage with the process.
These new ways of working will require support from regulation bodies, but we’re optimistic that the changes will happen. Regulators work within boundaries set by government and we believe that the pensions industry and its customers have the power to ensure these boundaries can adapt to the new world. The past 12 months have proven what companies can achieve when they put innovation into action. We’re looking forward to seeing some of these changes reflected across the pensions industry, so that we can deliver the dynamic, flexible options that people deserve.
This insight was developed on the back of our ‘Future-proofing pensions’ conference. The event covered a range of topics from the pensions industry.