3rd November 2021
When the Pensions Dashboard launches next year it will be the biggest opportunity in a decade for the pensions industry and employers to digitally engage with members. But who will be beneficiaries and which digital tools and services are going to become popular with savers, once they realise the (not so) full extent of their provision? Below are some predictions for 2023 and beyond.
1. Growth in popularity of pension consolidation services
IFAs and investment platforms encouraging you to transfer old pension pots into their SIPP isn’t exactly new news. I get at least one email a year from Hargreaves Lansdown on the topic and there’s often incentives to move pots (Wealthify are currently offering £100 cashback for transfers of £10-20K).
However, the actual process is often manual, time consuming and done on a pension-by-pension basis, which is off-putting for savers. The emergence of specialist pension consolidation brands like PensionBee and Penfold removes much of the hard work, as you simply need to provide your details and your pensions’ names when you sign up and they’ll do the matching.
These brands already have momentum, with over 500K Pension Bee customers alone (according to them). This customer acquisition has been supported through the development of open banking partnerships with the likes of Yolt, Starling Bank, Lumio, and Money Dashboard. Customers of these financial institutions can gain access to PensionBee’s service through the providers’ own apps.
Once savers are able to see the state of all their pensions via the Dashboard it wouldn’t be a surprise if there’s a rush to consolidate old or underperforming pots. With access to easy contributions through open banking apps and low friction sign-up processes, new and existing pension consolidation brands are likely to be the beneficiaries. But how long before the banks themselves catch on and use their greater customer access to provide a similar service?
Join our webinar on 9th November to find out more.
2. The growth in personalised digital pension providers
In theory every pension is personal. It’s tailored to your life goals, stage and appetite for risk, based on face to face interviews with your IFA, pensions consultant, or self-service questionnaire if you’ve gone DIY.
The reality is that most member schemes are founded on a core set of portfolios, chosen by the provider and there’s very little ability to create something bespoke. Provider’s portals often make it difficult to change holdings and many savers lack confidence in their abilities to make a change. Some would say the industry probably likes it that way: inertia means less admin overhead and special cases to deal with.
One of the outcomes of the Pensions Dashboard may be that it highlights the undifferentiated nature of their pension pots to savers and empowers them into looking for solutions that better fit their lifestyles and viewpoints.
There’s an increasing number of Fintech brands who are looking to fill this market. In the USA, almost 40% of gig workers feel unprepared to save enough to maintain their lifestyle during their retirement.
Steady, a startup, which provides job search and spending management tools for this audience has partnered with robo-advisor Betterment to offer Steady users a year of free financial advisory and investment management services.
Also in the USA, Ellevest offers robo-advice targeted specifically at women from as little as $12 a year. The full service includes retirement planning, advice and money management and access to wealth management, a debit card and a rewards/cashback programme. Ellevest was awarded best robo-advisor for IRAs in 2021.
With robo-advice technology becoming commonplace the way to differentiate will increasingly be through brand positioning. The growth of audience specific pension services could well be an outcome of interactions with the Pensions Dashboard.
3. Growth in the use of chatbots and machine learning
The role of Pension Dashboard is to get savers to engage with their pensions. If its rollout follows the pattern of other national schemes then one outcome will be an uptick in the numbers of savers looking for advice on what to do next. That presents an opportunity for pension providers and advisors.
But it also causes a challenge in terms of increased support and administration for individuals who are potentially quite “low value”. And not everyone wants to speak with an advisor: 44% of customers prefer to visit a company’s website before accessing assisted service (Source: Experian).
One way to provide quality guidance without increasing operator overheads is to use AI powered chatbots. Whilst the perceived wisdom is that they should be limited to simple tasks, there’s evidence to the contrary. Kandoor in the Netherlands is proving that chatbots can work in the pensions space.
Developed by APG, one of the biggest pension providers in the country, it handles 40,000 questions a month about pensions, tax and financial matters, with 90% successfully answered without human interaction. The platform is based on a combination of an algorithm based on natural language processing with the knowledge provided by more than 200 experts.
If the bot can’t answer a question it’s referred to a real-life operator and the answer is then added into the machine learning process - so the chatbot gets more efficient the more questions it is asked. With an increase in the need for quick, effective feedback imminent, providers who can deliver this level of accessibility will drive net inflows.
4. Uptake in financial wellness tools by employers
Alongside the potential increase in pension related questions the rollout of the Dashboard is likely to spark an increased appetite for education by savers who want help in making the best choices for their pension portfolios.
As well as the consolidation of old pensions there will be an increasing pressure on current employer schemes to make up the difference on savings shortfalls. Members’ financial wellbeing and support in making the right choices is likely to become an employer brand differentiator.
Personal finance apps targeted at employers, such as MyEva, could be beneficiaries. It acts as a digital IFA to carry out health checks on employees and then helps them build a personalised financial plan.
One helpful benefit is that it also gives the employer an anonymised snapshot of the financial wellbeing of their own workforce. Employers such as Unilever, Calvin Klein, and the NHS have incorporated MyEva into their employee offerings, while providers like LV= have white labeled the solution.
5. Increased use of gamification techniques
Increasing focus on pension savings as a result of the Dashboard will give providers and employers the opportunity to nudge savers to contribute more. Apps like Acorns are already allowing members to micro-invest outstanding account credit in a retirement fund. With open banking these types of tools and services are likely to find their way into employer schemes at some point.
For the cautious the use of simulators and gaming will be a way to gain confidence in investing, whilst minimising risk. In the US Wealthbase allows individuals to host simulated trading games and invite their friends to compete on investing performance. Game organisers can create games that trade the asset classes of stocks, ETFs, and cryptocurrencies. Fidelity, already sponsors games over Wealthbase and Salesforce, has an in-house club that runs on it.
So what do all these predictions mean for the industry?
First, there’s going to be a renewed focus on saver education and financial planning. Those who provide the best digital tools and marketing to support it will be at an advantage.
Secondly, there’s likely to be an increase in savers looking to move their legacy pensions. Those with the simplest, easiest digital self-serve and on-boarding journey will be the most attractive option for the newly enabled saver.
Thirdly, existing workplace portals can be hugely enhanced with the help of AI, visualisation, graphics and financial health checking tools. Success isn’t only dependent on re-platforming.
Finally, those who embrace open data will be the ones who’ll get the access to the largest pool of savers. Which financial institutions those are in 10-15 years time remains to be seen.
How can ORM help?
Despite a pension savings shortfall, employees often aren’t engaged with their pension until it’s too late.
So, what can we do about it? Using digital tools to engage members with positive, timely interventions isn’t a silver bullet, but it’s a good start.
Sign up to our upcoming webinar on Tuesday 9th November 2021 to find out how to use digital tools to engage members and help them achieve a lifetime of financial well-being.
You’ll hear from a panel of experts including ORM’s Andy Farmer (Consultancy Partner) and guest panellists Jamie Fiveash (CEO, Smart Pension), Anne Fairweather (Head of Government Affairs & Public Policy, Hargreaves Lansdown), Carol Young (Director, Pension & Lifetime Savings Association & Natwest Group) and Roger Higgins (Head of Member Services Technology, BT Pension Scheme).