AI and machine learning (ML) have the potential to enhance pension systems by improving personalisation, efficiency, and decision-making across various areas, such as member engagement, pension governance, investment management, and risk analysis, according to the CFA Institute Research and Policy Center.
The “Pensions in the Age of Artificial Intelligence” report examines the problems facing pension management and examines the advantages and possible drawbacks of utilising AI to maximise pension schemes.
The report highlights that, despite global pension assets totalling over $55.7 trillion, pension systems are struggling with shifting demographics, such as longer life expectancies and declining birth rates, driving a transition from defined benefit (DB) to defined contribution (DC) plans. Additionally, rising inequality, particularly among low-income and gig workers, is making retirement more difficult, and inflation is reducing purchasing power.
AI is identified as a key tool to improve pension systems by streamlining governance, enhancing member engagement through technologies like chatbots and robo-advisers, and supporting investment management and risk analysis.
The report also suggests that smaller pension schemes could benefit from external AI providers to assist decision-making while ensuring compliance with privacy laws.
It also finds that data analysis can help enhance plan design and communication, and identify vulnerable populations. The report advises plan sponsors to balance personalisation with avoiding choice overload when incorporating financial wellness services like budgeting tools.
The report points out that although AI has a lot of promise to improve member experience, personalise investment strategies, and revolutionise pension operations, its broad adoption is still in its infancy.
