How can Big Data and artificial intelligence genuinely improve workplace pension member outcomes?
When it comes to data, it feels like a case of ‘everybody’s talking about it but not everybody is doing it’. Yes being a pension provider creates a lot of data that can be played back to the scheme sponsor.
But what really matters is the type of data being gathered and the way it is used to help employers and scheme members. Data is pointless unless it can give genuine insights into challenges faced by employers and members and enables them to take actions to better meet their objectives.
What does an objectives-based approach to using data mean in the world of benefits?
It is a case of understanding the employer’s objectives, and making sure the data is interpreted in a way that helps meet them.
The data we collect needs to be used to target engagement efforts in the areas in which employers really want to achieve change, which could be completely different to what may be an assumed objective. For example, an employer may have a generous matching offer on their pension scheme but a low take-up of that matching. In general they may be quite comfortable with their current level of benefit spend and therefore not wanting to improve engagement in this area across their entire workforce – although may be keen to improve it in one particular area.
Data can be used to focus engagement initiatives on the relevant parts of the membership, whether this is by location or a particular employee segment. It is about using data to drive the right message to the right people at the right time. This will help to move away from a traditional approach of ‘one message to all’ to more segmented communications, with the ultimate goal being truly individual messaging.
Is providers’ data mainly being used to increase pension contributions and sell more products?
Far from it. While helping members to increase their pension contributions can often be extremely beneficial, there are numerous other ways that data can be used to help members, employers and their advisers and benefits consultants.
For example, for members it is really important to keep their benefit nominations up to date. For employee benefits consultants and advisers assisting employers, data from pension providers can help shape an organisation’s wider HR strategy and corporate planning.
An understanding of employees’ behaviour in relation to their pension benefits can inform the broader conversation around how to spend the benefits budget wisely. It can also feed into and inform the employer’s strategy for improving employees’ wellbeing and financial resilience.
Can behavioural science leverage the usefulness of data?
Yes. When running engagement campaigns we have done AB testing that has taught us what works and what doesn’t.
One good example is the communications exercise that was necessary to connect with our contract- based default members following the introduction of pension freedoms. We needed to create an engaging journey to obtain members’ consent to the change of default fund. The impact of chaser emails, employer endorsement, warm-up campaigns and the water cooler effect can be significant – all these strategies can have a big impact on the success or otherwise of employers’ campaigns. But these strategies have different success rates in different circumstances, so understanding when to use the right engagement strategy combined with the right call to action is key. This ultimately helps employers to maximise their benefits spend.
What role will data play within the life savings sector in the future?
There is a risk for providers that if they only ever talk to members about pensions, they are not going to give them the right sort of support. Isas are likely to play an increasingly prominent role in individuals’ financial plans, particularly for younger generations considering home purchase, and employers’ benefits strategies will increasingly look to reflect that.
We need to use data to look at the different cohorts within a workforce and understand what they are engaged with, their objectives and where employers, advisers and providers can help them.
There is also a fundamental job to be done in changing the mindset of many employees when it comes to money. This goes beyond financial wellness, to exercising and developing their financial planning muscles, so they start thinking about long-term financial challenges and taking direct steps to prepare for them. This is not going to be easy, but smart use of data to enhance engagement will make the task more achievable.