Pensions Expert 20th Anniversary: Improvements in pensions infrastructure will allow services we cannot even imagine at present, says Ben Cocks from Altus Business Systems.
This is not for a lack of innovative ideas – there are some astonishingly clever services being demonstrated and already in use in other industries. So why have pension services not already been transformed by new technology?
I have no doubt that the fintech entrepreneurs could develop some very appealing services, but they are hamstrung by the existing pension infrastructure
Transformations in consumer technology services are not always driven simply by the invention of a new consumer application. More commonly the real catalyst for change are reforms of the underlying infrastructure.
Smart phones did not appear just because Apple had a bright idea. It was the groundwork laid down by advances in semiconductor miniaturisation and mobile data transmission standards that was the real driver.
Video streaming did not catch on just because Netflix and Amazon decided to launch new services. It was only when the internet data bandwidth, to the average household, reached a few megabytes that the innovators could innovate.
The emergence of electric cars took more than a BMW engineer installing an electric motor. Much more important were advances in battery technology; and I suspect we will not see electric cars really catch on until we have wholesale reform of the humdrum (but hugely challenging) world of electric power distribution.
And so it is with pensions. I have no doubt that the fintech entrepreneurs could develop some very appealing services that could really help members engage with their pensions, but they are hamstrung by the existing pension infrastructure.
Good progress has been made
The key technology initiatives right now are concerned with reforming that infrastructure with developments in data standards, digital identities, trust frameworks and system modernisation.
Some good progress has already been made. Investment processes have already been streamlined with open data standards (aka ViaNova) and new standards for transfers have been developed along similar lines.
Forget about robos and chatbots – a bigger tech wave is breaking
Forget about robos and chatbots – these are just the froth on the crest of a much bigger wave of technology change sweeping through financial services.
The Tax Incentivised Savings Association is working with the government Verify service to create a common digital identity verification service for financial services, and following close behind is work on trust frameworks that would enable members to safely allow their data to be shared by service providers.
Pension systems are notoriously outdated and resistant to any connection with external services. But this is also beginning to change, and the pension dashboard initiative, assuming the government mandates participation, would compel administrators to open up their systems to external service requests.
In combination, these reforms will allow a new landscape of pension technology to emerge, where pension engagement is supported by a network of services and service providers rather than just the pension administrator.
With these foundations in place, the more visible innovation can begin from the pension equivalents of Amazon and Netflix. And I am sure that will result in member services that I could not even imagine right now.
Ben Cocks is founding director of investment automation specialists Altus Business Systems
