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Forget politicians, it's tech that will change pensions most

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Forget politicians, it's tech that will change pensions most

We have seen a significant number of changes to pension legislation over the past decade, but they are nothing compared with the pace of change in the technology sector.

The likes of Uber, Netflix, Facebook and Amazon have experienced incredible and rapid growth. We are starting to see this filtering through into the retirement space, with schemes that embrace this change and improve their digital propositions well-positioned for the future. And with the auto-enrolment review now underway, with a key focus on engagement, technology has a significant role to play in ensuring effective solutions are delivered.

Communication

We are seeing an increased usage of apps on smartphones and tablets as a means of communicating and managing finances and purchases. The traditional communication method of paper has never been a great success for pensions and is increasingly being rejected by our customers.

Forward-thinking providers are creating dashboards that enable customers to review all their provider products in a single view and there are apps that help customers visualise what their retirement lifestyle will look like.

The pensions dashboard project is an example of an industry level digital engagement initiative, which is currently at prototype stage and has recently been successfully demonstrated in front of both government and the wider industry. There is still some way to go in its development but, provided it achieves universal coverage, this could be a powerful tool providing access to a range of plan information. We will need legislation to achieve this.

Robo-advice

Robo-advice and guidance propositions are on the rise where we have seen firms develop streamlined solutions offering an alternative way to engage with customers. 

Robo-advice is featuring more in the IFA sector too. Clients can construct investment portfolios in accordance with their risk profiles, they can view all their products online and request valuations on demand. Other robo propositions will determine which assets to invest into based on algorithms, factoring in risk and understanding profiles of the underlying customers.

Associated costs for robo-advice will typically be lower than an actively managed portfolio. This may be seen as an attractive proposition to the mass-affluent market who cannot afford or do not want to pay higher fees. A 2016 CFA Institute FinTech Survey Report showed 54% believing asset management would be most impacted by automated advice tools.

To be clear however, we see robo-advice as an adjunct not an alternative to the traditional face-to-face approach but it provides IFAs with additional complimentary services to offer and may broaden their client bases.

We need to continue to bring pensions into the digital age, using technology advancements and sophisticated engagement techniques used in other sectors such as retail and banking.

Adrian Boulding is director of retirement at TISA, and Renny Biggins is pensions technical officer at Tisa.

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