The UK retirement sector plays a vital role in helping employees to secure their financial future. Due to the sector’s expansion and increasing regulatory oversight, technical debt has become an obstacle to growth. As technology advances, so too does the complexity of managing legacy systems, ensuring compliance, and addressing member needs. This has consequences for members through limited engagement and operational constraints. Pension providers, administrators and trustees feel the impact of technical debt through increased cost to operate and maintain pensions schemes.
What is technical debt?
Technical debt arises when systems, software, or processes are built rapidly or without long-term scalability in mind. It might occur due to inadequate investment in technology upgrades, the use of outdated software, or the decision to maintain legacy systems that are no longer fit for purpose. Over time, these systems become increasingly difficult to maintain.
In the UK’s pensions sector, technical debt often takes the form of outdated administration systems, limited integration with emerging digital tools, and reliance on manual transactional processing. While these legacy systems may still function, they are inefficient and prone to errors. The cost of maintaining these systems driven by steadily increasing regulatory change is growing exponentially.
The growing trend of personalisation
As consumers become more accustomed to personalised digital experiences from the fintech sector, there is growing pressure on the UK pension industry to provide the same level of service. Personalisation includes the tailoring of services or communications to individual members based on their specific needs, goals, and circumstances. Personalisation requires the granular integration of advanced data analytics, real-time processing, and AI-driven insights, which many legacy pension systems are ill-equipped to handle.
Member engagement
Engagement is another key area of focus for the UK retirement sector. Long standing low member engagement has seen many employees showing little interest in their retirement savings until they approach retirement age.
Modern retirement platforms are now incorporating tools such as mobile apps, online dashboards and gamification to engage members. These platforms offer real-time updates on pension forecasts, Pension Dashboard connectivity and even personalised retirement guidance. Providers dealing with technical debt will find themselves unable to keep up with the latest digital trends, which can further hinder engagement.
Education, guidance and advice
Pension scheme members typically have 3 questions:
1. What have I got? Expectation here is that all pensions, including the state pension are displayed in one place. This can be extended to include further financial integrations to include wider financial products.
2. Do I have enough? Expectation here is for the platform to provide a goal such as PLSA Retirement Living Standards or a “people like you” scenario.
3. What can I do next? Expectation here is that next steps are clearly laid out for each member, incorporating personalised video content for example.
Addressing technical debt
Addressing technical debt is no small task for pension providers. It requires a significant investment in modernising infrastructure, upgrading legacy systems, and improving data management capabilities. For many in the industry, this means moving to API led cloud-based solutions, integrating advanced analytics, and embracing new technologies such as artificial intelligence (AI) and machine learning.
Conclusion
Digital transformation using a modern API led platform with advanced automation and data management capabilities will help pension providers remove technical debt and migrate from outdated, fragmented systems to a more scalable and agile infrastructure. This allows pension providers to focus on innovation and differentiation whilst a modern platform delivers the straight through processing and API integration required for low cost, efficient, daily operations.
