Pensions: not so much a
shifting landscape as a full-scale earthquake

Armit Bhambra
Armit Bhambra- Head of UK
Retirement for iShares EMEA

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In 20 years’ time, pension savings will look radically different. That’s the promise from the savings experts who came together at BlackRock’s WealthTech 2019 conference to discuss how technology and customer expectations could drive a pensions revolution

The success of digital innovation will define the financial futures of millions of long-term savers in the coming years. Armit Bhambra, Head of UK Retirement for iShares EMEA, knows that technology is one of the key ways to solve the country’s retirement challenge.
“People are living longer with less,” said Bhambra. “The industry needs to help people make good financial decisions seamlessly on a day-to-day basis.
“There are some good things happening, but we’re on a journey. In 20 years’ time, we will be looking at a massively changed industry.”

The role of digital

Bhambra has described the pensions industry as “ripe for digital disruption” and other pensions experts agree that digital tools would change the way we save for retirement. 
Romina Savova, CEO of PensionBee, a platform that lets consumers consolidate and manage their existing pensions, said that the industry needed to use technology to reach a level of simplification that allowed them to engage with their retirement savings. 
“The key is to help people to make decisions in the moment. In the digital world we have to be led by the consumer and the problem that they are trying to solve at the moment,” she said.
Martin Harris, Head of Advice at Wealth Wizards, agreed that technology is already making a difference, but said there is more to do. “What to do with your pension pot is still the biggest decision people make in life, and the technology exists to help people make good decisions.” However, he added that there had been “a lot of confusion” following the pension freedoms and that people wanted technology that makes pensions simpler and cheaper.
Experts identified a number of digital tools that will help change consumer attitudes to their pensions. These include apps that allow people to access data on their pension savings alongside other financial products, as well as automatic tools that let them add to their pensions without thinking about it.
“We talk a lot about engagement, but at the same time behavioural tools suggest that engagement isn’t always the right way to go,” Savova said. “Auto-enrolment relies on people being completely disengaged and works really well – for many people automatic things that happen are a good thing.”
However, she added that the launch of the PensionBee app has massively increased consumer engagement compared to the company’s website.
“I thought initially that it wouldn’t make much difference, but actually having a native app that you can easily click into with one tap and face ID has increased the level of engagement with our product,” she said. 
Brian Henderson, Head of Defined Contribution at pension consultants Mercer, agreed that technology could encourage customers to engage. “Technology exists to help people make better decisions,” he said. “Digital helps with that – it makes a complicated problem a lot easier to digest.”
He added that technology would help with another key part of pension transformation: consumer education. He described a two-minute video that had been sent to members of a workplace pension scheme that encouraged them to save more. “Two-thirds of people watched it to the end and half increased their pension contributions,” he said. “It was a digital wake-up call.”

The role of financial wellbeing

Bhambra, at iShares, said that a focus on financial wellbeing will help people to realise the importance of saving for retirement and that companies that focus on a wellbeing message will lead the way in increasing customer engagement. He pointed to new statistics from BlackRock’s Global Investor Pulse Survey¹ showing that more than half of people in the UK believe that financial health means being able to prepare for retirement. Money, meanwhile, is seen as the most impactful cause of stress.
“The idea of having not enough money in retirement is causing a great deal of anxiety in our society,” he said. “But people are confused by how best to save. It is very difficult for the people to prioritise the right things financially at the right times – for example, whether to pay off the credit card, top up the pension, pay off the mortgage, the list goes on. This is made worse by the fact that ‘pensions’ is not a word that people generally connect with.”
Henderson, at Mercer, said that individuals were yet to engage with their pensions at a deeper level, which would increase financial wellbeing and help them to invest in a way that is aligned with their attitudes and beliefs. Technology, such as Open Banking and the much-anticipated Pensions Dashboard, would help and encourage people to take action he said.
“Once we engage at that level, we can engage with how they think, believe and feel. Once we capture that it will be a completely different story. I do passionately believe that will change people’s views of pensions.”

The end of the ‘pension’?

Some experts believe that changing demographics and working patterns, as well as greater technological integration between retirement savings and other accounts will spell the pension’s ultimate demise, as it is swept up into a more general fund to pay for old age.
Savova, at PensionBee, said that Open Banking, which allows us to open up our bank accounts to third parties, will mean that people can see their pension right next to their bank balance, allowing them to view it as part of an overall financial strategy.
“Over time, when you reach 65 or 68 or 70, managing your pension would be as simple as managing your bank account,” she said.
Henderson, at Mercer, goes even further, pointing out that as retirement becomes more fragmented and less clear cut, and different savings pots become more closely aligned, we may no longer have pensions.
“One day, pension won’t really exist as a term,” he says. “We will have quite different experiences in older life and different ways to fund that.”
The industry, then, has to take on the role of developing technology and engagement to deal not with the problem of pensions, but with the problem of funding a longer-living population well into their old age.
By developing digital tools that align with financial wellbeing messages, it can encourage them to make decisions that will ensure they are well provided for when they are older.
“People will become more engaged with their pension pots, and in the same way that their purchasing habits for food and clothes reflect their beliefs, their savings will too. And they won’t be seen as just funding for later life, but as a pot of money that will fund a lot of things along the way,” Bhambra says.
“It isn’t just about your pension scheme. It isn’t DC or DB. Your retirement pot is the sum of every single financial decision you make on a day-to-day basis. It needs to get a lot more granular, a lot more integrated into everyday life.” By Wealthtech 2039, he is hopeful that many of the issues that plague retirement saving now will be things of the past.

1Source: Blackrock Wealth Management Industry Survey, July-August 2018. Survey was conducted on 500 people.  

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