Specialist administrator raises concerns about underinvestment in technology, while Aegon warns of dashboard impact from government cost-cutting.
The specialist pensions administration provider warned that schemes with “technology debt”, such as outdated systems, “run the risk of compromising the future security of members”.
Garry Wake, managing director at the company, cited last month’s CrowdStrike outage – which disrupted millions of businesses around the world – as an example of why schemes and administrators needed to ensure their systems were robust.
“For businesses in the pensions administration sector, the repercussions of ignoring technology debt can be particularly severe,” Wake said.
“Legacy systems, while still functional, often lack the advanced security features and integration capabilities necessary to support modern operational demands.
“Additionally, these outdated systems can hinder the implementation of new functionalities, delay service delivery, and increase vulnerability to cyber threats – all of which have a huge and direct ultimate impact on the member.”
Addressing and managing technology debt was “not merely an operational necessity but a strategic imperative”, Wake added.
Administrators need to prioritise technology spend even if there may not be an immediate apparent benefit, as upgrades will often show value over time, he said.
“In the pensions industry, we cannot take any chances with data and security; members’ life savings are on the line,” Wake concluded. “Trustees must challenge their providers to ensure they have a robust technology strategy in place.
“A fortified administration infrastructure that will adequately withstand potential vulnerabilities not only reduces risk but also enables a quick response to regulatory change and makes it possible to leverage new technology as soon as it becomes available making innovation achievable, not aspirational.”
In a recent update from the Pensions Administration Standards Association, its chair Kim Gubler warned that the pensions industry had “spent decades driving down the price of admin in the name of efficiency”. She added that there was “little understanding about how spending money now, or on an ongoing basis, will both reduce costs and improve engagement in the long term”.
Government cost cutting could hit dashboard awareness
Chancellor Rachel Reeves’ plans to cut the government’s communication budget by £50m “could jeopardise the success of pension dashboards”, according to Aegon.
Kate Smith, head of pensions at the firm, said: “Effective government-led campaigns are crucial for raising awareness about benefit changes and encouraging positive behavioural shifts.
“Poor communication can lead to confusion, distress and mistrust, as seen with the state pension age equalisation, which left many women in the dark about when they would receive their state pension and financially unprepared.”
In March, the Parliamentary and Health Service Ombudsman issued a damning report into the Department for Work and Pensions, saying it had failed to communicate the changes to the state pension age adequately.
The department was aware of communication issues for years, the ombudsman said, but failed to act to address concerns raised by research and feedback.
Aegon’s Smith said the success of pension dashboards “hinges on public awareness and understanding”.
“The government is uniquely positioned to lead and coordinate promotional efforts, much like it did with auto-enrolment,” she said. “This communication and marketing investment is essential for increasing engagement and ensuring better retirement outcomes. Without it, the adoption of pension dashboards will likely suffer.”
Further reading
How Nest is preparing for dashboard connection day – Richard Smith’s Dashboard Nine-Nine series (31 July 2024)
An end-of-term report on pension dashboards (5 June 2024)
Time to pick up the pace on pensions dashboards (25 March 2024)
