From communications to greater organisational efficiency, AI will bring many benefits to pension schemes – but it does come with risks
Whether we know (and like) it or not, artificial intelligence (AI) is encroaching on almost every area of both our professional and personal lives.
From getting directions on our phones to checking our emails, the technology being deployed is increasingly working independently and learning from our actions.
At the Pensions and Lifetime Savings Association Annual Conference 2024, the theme of AI was covered with more interest and scrutiny than ever before, with sessions not only examining the potential it could offer the industry, but also the risks it created.
A survey of UK CEOs, presented by PwC, outlined key benefits and application they believed the technology could deliver. These included efficient data processes, customisation and personalisation of information, efficient governance and compliance processes to enhance decision-making.
However, there are risks. Some 74% of delegates said that getting the balance of risk and opportunity posed by AI was key, with the others split between favouring each side of the scale as the most likely outcome of employing the technology.
The impact of AI
Delegates in the audience broadly felt AI and generative AI would impact the pensions industry but were split on the impact and timeline. Some 15% foresaw rapid and transformative change over the next one to two years; 60% expected meaningful improvements over the next three to five years, with 23% seeing moderate change in the next three to five years.
When asked how much of an opportunity AI represents to the pensions industry, four percent said it would have little impact; almost three quarters (70%) thought the impact would be meaningful; 27% believed it would be revolutionary.
In conference sessions, large organisations running sophisticated pension schemes – Vodafone and Brightwell – explained how they have already begun to trial and implement AI techniques in limited areas of their operations.
According to Alan Filtness, head of member services business change at Brightwell, which runs the BT Pension Scheme, among others, its “holistic approach” has seen AI being deployed across parts of the business such as knowledge management, quality assurance and workforce management.
“The impacts are going to be felt across the entire organisation,” said Filtness, adding that the deployment needed to be well planned, bringing everyone along by examining internal service-level agreements, limitations of the technology – for the moment at least – and where it can drive value.
Kate Grant, pensions executive at Vodafone Group Services, explained how AI can improve engagement with pension scheme members, particularly during critical touchpoints such as retirement. She emphasised the need for AI tools that can simplify complex information and provide personalised guidance to enhance understanding and decision-making among members who often feel overwhelmed by their options.
Yet, she noted that boards needed significant preparation before deploying the technology. “We need to start to think about putting together a policy about how we’re going to use AI and what we’re going to use it for,” said Grant, adding that schemes “should be asking the right questions of the advisors of how they’re adopting the tools too”.
Panel sessions highlighted the importance of data as a critical fuel for AI systems, noting the exponential growth in data generation and ensuring it is accurately sourced, cleansed and used, with the right oversight mechanisms.
Another key theme was the distinction between innovation and adoption; while innovation is celebrated, actual adoption rates remain low, indicating that the journey is just beginning.
Adoption will be a gradual process influenced by factors such as skills, data quality and the interplay with other technologies. Training for board members, employing critical thinking skills and being alert to the potential biases in data were all discussed at the conference, with the need for human interaction alongside these new tools noted frequently.
Over three days, discussions provided valuable insights into both the opportunities and challenges presented by AI in all areas of pension scheme management, and while some schemes remain hesitant, there is huge potential – but the technology, its objectives and oversight must remain in the hands of its owners.
