Digital pensions? If you build it, they will come

The general public are now comfortable talking with colleagues and family members using videoconferencing software and ordering meals to their homes using smartphones.

Indeed, for businesses in most sectors, ease of access and technological innovation are seen as prerequisites for success. The pensions industry has, however, remained strangely detached from this modernisation, without much justification.

A recent report by LexisNexis Risk Solutions, for example, found that 49 per cent of pension trustees believe there is no proven appetite for a digital pension solution. Perversely, many trustees also cited disengagement as a key risk of not providing a digital offering.

People are more tech-savvy than some trustees think, and the reluctance of members to use a digital pension solution is clearly overestimated by trustees

If anything, the current lack of digital offerings in the sector tells us more about trustees’ attitude towards adopting technology than it does about the appetite of pension scheme members towards using it.

When it comes to digital engagement, we can generally divide trustees into two distinct camps. For some, member engagement is a priority and a key challenge for the industry to overcome. Others are at best ambivalent.

For the most part, this is because creating a digital pension scheme is viewed as a short-term cost, which does not make the cut against other scheme priorities.

However, it must also be said that many trustees do not know what a good digital solution looks like, and therefore underestimate the value it can bring to the scheme as well as the member. 

Cutting admin costs

Member engagement and providing the ability to self-serve undeniably represent important benefits afforded by a digital pension solution, and large schemes looking to adopt a digital offering generally cite these factors as primary reasons for doing so.

By allowing members to self-serve, a good online offering can also reduce the amount of time administrators spend dealing with simple enquiries from members. It can therefore reduce administration costs and free up administrators to work on high-value tasks.

Despite this, trustees continue to overlook the benefits these digital platforms can provide.

At a time when schemes are facing several significant administrative challenges, including ensuring readiness for the pensions dashboards and changes to defined benefit funding rules, this time saved is invaluable. 

Developing a DB smartphone app can prove crucial for members. Such technology can significantly reduce the number of calls to administrators, by up to 30 per cent in some cases.

Scheme members will use apps for a range of things, including calculating requirement, viewing benefits and transfer values, registering a change of address, and gaining clarity on rules and regulations. 

These types of enquiries are largely handled by administrators. If you make it easy for members to self-serve, many will, and the benefits for schemes in terms of reducing costs and boosting productivity will be clear to see.

To that point, the success of smartphone apps comes as no surprise in some ways. Pretty much every financial services sector has gone online, with smartphones the most used device to access the internet.

Appetite for technology

Generally, smartphone usage in the UK has increased across all age ranges since 2012. According to Statista, just 9 per cent of people aged 55 to 64 used a smartphone in 2012, which then rose to 87 per cent by 2020. For those aged 65-plus, this rose from 3 per cent to 65 per cent.

Clearly, there is an appetite for more engaging technology, but pensions websites are typically riddled with barriers and registration difficulties. Good engagement has tangible benefits both for the member and the scheme. To realise the value, however, you must get the member online and then encourage them to stay there.

Traditional pensions websites have limitations. The principal problems being first registration and then making it easy to access again. Getting 25 to 30 per cent of members on is a typical result.

Websites require usernames, passwords and some form of additional validation, like a one-time code sent to the phone or email address. This can be tricky for people to navigate when they try to access the site after first registration. Often, passwords are forgotten and people can just give up.

On the other hand, apps are seamless and registration is fast. The best result we have seen is in excess of 70 per cent adoption. Personalised QR codes can be used in place of a password, and due to the pandemic people are very comfortable with these now.

That said, having got the member in, it is vital to make the app easy to understand and use or people will drift back to traditional engagement with the administrator.

People are more tech-savvy than some trustees think, and the reluctance of members to use a digital pension solution is clearly overestimated by trustees. If you make it simple for them, people will engage. This benefits the member and the scheme alike.

Graeme Riddoch is head of proposition at Mantle