The rise of artificial intelligence has sparked the interest of policymakers, but trustees understandably may be more cautious. IGG’s Lou Davey looks at the risks and rewards of using this technology in pension scheme governance.
In recent years, few technologies have generated more excitement, or anxiety, than artificial intelligence (AI).
AI adoption is already transforming the financial services industry, and recent research has claimed that AI could boost the UK economy by £550bn over the next decade.
With growth firmly on the chancellor’s agenda, incorporating AI into our industries has the potential to help firms become more agile, more efficient, and more responsive to customer needs.
Trust in the potential
Valued at roughly £3trn and representing a huge potential for investment in the UK economy, as well as the later-life livelihoods of millions, the potential of AI in pensions should not be ignored.
Enhancing the way schemes are governed and administered could have far-reaching implications for financial wellbeing and economic resilience, impacting not just individual savers, but the wider UK economy as well.
Central to the function of the UK pensions industry are trustees, already facing an increasingly complex set of challenges, including how to maintain robust governance, support members in making better decisions, and navigate a shifting regulatory landscape.
The growth in the professional trustee market is only one way in which the industry has changed beyond recognition over recent years. Throw technological disruption into the mix and the need to tread carefully is even more crucial.
The responsible use of AI has the potential to materially enhance the quality of trusteeship, not replace it. Used well, AI can strengthen how we govern pension schemes, analyse and interrogate data, communicate with members, and manage risk.
Still, no conversation about AI is complete without addressing the risks, and they are real.
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Managing risk and reward
The rate at which AI is evolving can feel unrelenting at times, with people and policies struggling to keep up. While there are real benefits offered by AI, it is crucial that we balance keeping pace with technological developments with understanding the risks and regulatory grey areas that come with it.
The threat of scams, data misuse, and savers turning to unregulated AI tools for financial advice is growing. That is why human oversight remains central to how AI is deployed in pensions governance.
Trustees have fiduciary obligations to act in the interests of their members, and while AI can provide powerful insights, it is certainly no replacement for professional judgement.
Just as the introduction of professional trustees has strengthened scheme governance over the past decade, AI can also support more informed, effective decision-making. It can help trustees ask better questions, spot emerging risks sooner, and maintain consistency in their governance. In short, AI can sharpen the tools we already use.
An AI professional trustee?
Professional trustees are well-placed to help pension schemes navigate AI adoption. The role of the professional trustee is to challenge, interpret risk, and ensure that any tools adopted strengthen, rather than dilute, these core responsibilities.
Professional trustees also have a responsibility to set a gold standard for the appropriate use of AI in pension trusteeship. But this shouldn’t just be left to individual firms. The sector needs structure, clarity, and sector-wide ambition.
The government has rightly taken an active interest in pension reform in recent months. The same energy must now be applied to setting out its intent on AI.
In the short term, this could include transparency requirements and best practice guidance. In the longer term, we need a flexible regulatory framework that can evolve with the technology.
If we are to truly harness AI’s potential in pensions, industry and government should work together to set standards that protect members while supporting innovation.
That is how we will build a more resilient, forward-looking pensions system - one that keeps human judgement at its core, but with technology at its disposal.
Lou Davey is head of policy and external affairs at Independent Governance Group.
