Better deployment of scheme data combined with open banking and commercial dashboards, when they come on stream, can power much more effective engagement in retirement planning.
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Yet worries persist that scammers remain well placed to take advantage, using the open technology that many members already use day to day, even as pension providers seek closed-off, more reliable systems around AI.
Not surprisingly, opinions among panellists are mixed. L&G strategic relationships director Alex Snowball noted that schemes and providers already had a huge amount of data but added: “We can supplement and enhance that data and utilise it to communicate better. We already have our member engagement platform that allows us to look at members’ information.
“They may be approaching retirement. We then supplement that data, for example, where they have not completed retirement guidance, where they haven’t created a plan. This member engagement engine crunches all that data and sends out a very targeted communication to say: ‘Actually, this is really important.’ So, bringing behavioural science into the communication nudge.”
He said their guidance service launched in November 2024, while ‘self-serve’ at the moment, allowed them to see that the average client who has £30,000 with L&G may have £90,000 in pensions elsewhere and £61,000 in savings. “Now we can create a much better picture to say what is the solution that could be right for you, gleaning that information.”
He said the dashboard, the commercial dashboard and Open Finance can be pulled into this too, with the member’s permission.
“Bringing all of this data together is key. Yes, there will be challenges along the way, but I don’t think it will be that hard to create a much better picture of a member’s financial position, and then present back a solution to them in a simplistic way to help them achieve a better retirement outcome”.
Kelly Parsons, head of DC proposition at Broadstone saw the potential for some people to have significant boosts to their retirement planning as a result of the arrival of the dashboard. She said: “People who might be on the cusp of the breadline might find a pot from 40 years ago. It’s exciting to know that for some, these pots should hopefully be revealed.”
The shadow side
Yet Barnett Waddingham partner and head of DC and workplace wealth, Mark Futcher was worried about the ‘shadow side’ of this information. “The best marketers, the best sales teams are going to find ways to use this kind of data in ways that are not in the members’ interests. I really hope regulators clamp down on some of those sharp practices.”
WTW director, retirement Anne Jones added: “The dashboard is the right thing to do. For people to know what they’ve got, all in one place. But there’s a real danger of scammers going: ‘I can look after all that money for you in one place’ too. There’s going to have to be a real ramping up by trustees, advisers, schemes and companies to help protect members.”
LCP partner Lydia Fearn said: “Our expectation is that it will be advertised on consumer channels, such as those run by Martin Lewis. There’ll be a massive spike in enquiries, but it will fall back again.
“With the scamming, it’s going to be the providers who have to catch it, because the dashboard is not transactional, it’s just information.
“We’ve seen the technology that scammers are using to steal from people’s bank accounts, and it’s quite frightening how people get sucked into these things, with scammers using different ways to try to access this money, like buying Amazon vouchers. We have to have a wall around it. But that is going to be on providers.”
Other eyes on wealth
XPS partner Christopher Barnes said: “It could be transformational. But while we’re sitting in this room talking about pensions, there are people in other areas of finance sitting in similar rooms and they want to dominate this space. That’s as well as the Amazons, the Googles, the massive entities.”
“Ultimately this is a battle for overall wealth management. And those that control the data may not actually be pensions people. There is a very big picture thing going on. The risk is the pensions world doesn’t see it coming.”
Neil Kempshall, DC consultant at First Actuarial added that it comes back to trusted learning sources. “The AI will only be as good as the information that’s been put into. It’s doing a lot of the heavy lifting and absolutely magnificently for providers.
“But there’s got to be some sort of check and balance in the system in terms of security and validation. The other thing that technology does do really well is present information and data factually, but can it emotionally connect with the people that it’s designed for?”
Scammers are on the same open system as members
Aon DC consulting partner Gemma Burrows again stressed the importance of having effective guardrails, but said providers can also using tech to ‘compete’ with the scammers.
“We’d be missing a trick if we thought that we didn’t have to use technology in a way that’s going to compete with the scammers that are exploiting the opportunities that come up using that technology. If you’ve got people exploiting it, then as trustees, providers and advisers, we need to use this technology because that is how consumers are getting information and what they’re relying on to get information.”
She says it is really hard to know exactly what those guardrails will be in future. The AI is as good as what goes into it. Thus, the information that open AIs use may be skewed.
“It’s basically a massive search engine of what’s already available. A lot of it is skewed towards males and what would be right for a male professional, because that’s the information that’s in there. We need to think about how we can make it applicable to females and people that aren’t in that demographic,” said Burrows.
Fearn added: “It means being very mindful of the hallucinations that AI has. You have to train it within your own environment. It has to be very controlled.”
There was also discussion of the use of targeted messaging to prevent poor outcomes.
WTW director, retirement Anne Jones added: “The schemes I talk to are making a more concerted effort to look at what people are doing, and use targeted messaging. That probably wasn’t there when the freedoms came in, because people didn’t see that it was going to be quite as bad as it has been.”
There was a discussion of how the industry would manage withdrawals of tax-free cash, which had been amplified by media scare stories of the government bringing in retrospective limits to reduce tax-free withdrawals already accrued, something it has never done and which would be against human rights laws. Delegates at the event felt that the government could help.
Snowball said: “People like certainty. Why don’t we just take that off the table for a period of time so we can help people not make bad decisions?”
Jones added: “People are often moving to Sipps to do that. So I’ve got a lot of schemes where members are doing the partial transfer of their current assets to a really expensive Sipp they may not need, just to get the tax-free cash.”
Contactless pension withdrawal
Panellists discussed a move to offer even easier access to pensions via an ATM-style, card something that two providers in the Corporate Adviser DC Pensions Into Retirement Report had said they were actively exploring.
Hymans Robertson DC associate consultant Michael Ardill said that if you were going to offer this “it has to fundamentally be built into the retirement solution.”
He added: “The use case may be to ‘bridge the gap’ or be able to make decumulation feel more tangible and protect against money moving into inefficient tax environments. But the guardrails have to be so strong around it, to not undermine everything that we’ve discussed. We’re talking about large pots of money, and most people would never see that amount of money sat in a current account.”
A need for friction
Burrows added: “We were talking about making things easier for people, bringing their information together. But this is one area where we don’t want to make it too easy for people. There needs to be some friction, rather than making it really easy to access money that’s got to last you for the rest of your life. And I’m not saying there’s not a place for it, perhaps bucketing your money, having a longer-term fund and then something that you can use for immediate needs. But there needs to be some friction, even just to give people the ability to pause and think about what they’re doing before they access it.”
Kempshall added: “Greater access – a cash card. What could go wrong? People are already pushing the envelope when it comes to taking 8 per cent withdrawals from DC pots. You’re almost taking the guardrails down. Yet it’s a logical development, in terms of open finance.
So is it a good thing? The answer is yes, if you’re trying to build the perception that your pension isn’t locked away and is this kind of opaque thing. But there has to be a series of checks and balances and limits in the system, as you have with a cash card at the moment, where you can’t withdraw so much per day, or so much a week, with other prompts saying I didn’t realise I’ve taken out this much this week, this month.”
Parsons said: “Maybe they won’t go crazy and spend it all in one go. I think it’s a great idea but with the controls that we’ve mentioned – certain amounts, certain withdrawal limits, maybe having it in buckets or pots or it takes 3 to 5 days to get it out from the main pot before you put it in your easy access.”
Jones added: “We need to make sure that it doesn’t bump up charges. Because what you don’t want is for people to have really expensive charges in retirement, because it’s not like you can put the money back in. Once it’s out, it’s out.”
