Pensions are not considered at the vanguard of technological innovation. Much of the industry focus has been on digital banks, investment and wealth management services. However, there are now greenshoots of growing innovation within the sector focussed on how fintech may be able to help consumers save and plan for their retirement.
To get a better sense of what consumers want for the future, we asked our Fintech Beacon research community how they were currently planning for their retirement, and what services would be really useful to them in the future. The Fintech Beacon community provides a bellwether for the industry, to offer direction on the digital services that are needed for the future.
This is a group that is engaged in, interested in and actively using new digital financial services. However, this does not always extend to an interest in retirement savings and planning. Pensions remain opaque for many and there can still be a high level of disengagement. There remains a sense across age groups that pensions are too complex, beyond their understanding and boring.
“I’m not [saving for retirement]!!! I never have. I’m starting to get worried about it now, but not enough to start saving. My employers do a pension but I haven’t put money in. I don’t know much about pensions.”
Age 30-39, digital bank customer
In addition to this, the majority of retirement saving among this group is done via a workplace pension. This additional degree of separation, having an employer arrange the pension rather than managing it themselves, means that even financially engaged consumers do not have a clear idea of how much is in their pension, nor what this would translate into in terms of income.
“My pension is managed by my employers choice of pension handler and I do not really keep an eye on it. I have seen instances of a friend who manages their pension via their banking app which is really useful and I would be interested in this platform, and visualise my pension and maybe have a date / fluctuating timeline when I could retire.”
Age 21 – 29, robo-advice & digital bank customer
These are barriers that the industry has been facing for years. So where can fintech fit in to address these issues, and what are the key things that consumers need?
1) A consolidated view
It used to be that workers would stay with a single employer for a long time. This is no longer the norm for consumers, and now even younger workers have moved employer multiple times over a relatively short time, and therefore accrued multiple pensions. With multiple DC pensions, consumers feel they are losing track of where their money is, as well whether their funds are making money. There is a strong desire not only for a consolidated view of their pension values (hopefully addressed soon by the upcoming Pensions Dashboard), but for some a desire to consolidate their various DC pensions into one pot, accessible via an app. By doing this, digital consumers will feel in greater control of their savings, and therefore more able to plan for their future.
“I consolidated a few very small pensions into PensionBee, and now use this account to make monthly and ad hoc payments into my pension. I couldn’t tell you much about the underlying fund (not because that information is not available – more that I don’t know how to compare that information to any alternatives). I think it’s held with BlackRock but honestly I don’t know much about it, or how it will perform.”
Age 30 – 39, roboadvice customer
“I’ve had a few from different employers so it’d be great if there was an easy way I could consolidate these schemes. I have no idea what’s going on with my pension to be honest so an app would be amazingly beneficial”
Age 21 -29, digital bank customer
“I also have some dormant accounts from previous employers and one my parents set up. I’d like to combine these all but it seems like a challenge. I’d really like a better way of doing this online, as to be honest I am much more comfortable with the online interface, rather than paper forms and post etc.”
Age 21 – 29, digital bank customer
2) Access, updates and education
Digital consumers feel that having greater access to their pension funds, whether this is simply understanding the current values or actually selecting funds and risk levels, would be of benefit. This audience want to have instant access to their pension values, as they would for a digital current or savings account. The expectation is now that this information should be accessible to them whenever they want it. However, there is also an acknowledgement that they do not truly feel like they fully understand pensions. If companies decide to provide digital app-led access to pension investments, it will be essential to provide information and support within an app to ensure users understand the implications of any changes they make, but also feel informed enough to make decisions.
“I would like to have more control over managing pension funds so that I should be allowed to choose risk appetite and quality of investment that my pension fund offers to me. I am also open to using a robo-investment provider after due diligence.”
Age 30-39 robo-advice & digital bank customer
“For me and my own pension fund I think access and a way of managing the money through an app would be very useful. I think people find pensions very confusing and a little off-putting, and an app or website that explained pensions and made accessing and managing them a bit easier would be great.”
Age 21-29, roboadvice customer
3) A socially aligned pension fund?
We have identified different ‘personas’ within our community, noting how the transition to digital-only providers has been motivated by a variety of factors. One of these key personas shows a strong tendency towards ethical, socially mindful businesses. Not only this, but some community members are interested in the sphere of social savings and investments, and would consider extending this further to include putting their retirement savings into a socially beneficial fund. Providers should be aware that the consideration of the social impact of investments is growing, and that some digital consumers now feel this is an important factor. Providers should be careful not just to feel decisions will be based on traditional risk / return trade-offs.
“I would prefer it to be in an ethical fund, but I don’t know how viable that is at the moment.”
Age 30 -39, robo-advice customer
4) Not just the young requiring support
Is it not just consumers within the accumulation phase of their retirement saving that want to have a closer grip on their pensions. Those approaching retirement, and transitioning into retirement, are in need of greater guidance than they are currently receiving. From our Retirement Choices research we know that many feel unclear about the best choices to make for using their retirement saving, and that they are doing a great deal of self-directed research online. There is a clear opportunity for providers to start engaging with their customers digitally about the different options available to them. This could be as simple as providing information within an app, triggered by life-stage, or trying to transition customers into a more interactive discussion about their options via telephone or webchat. It will be important that this critical phase the retirement journey is catered for within a digital service, especially if companies want customers keep their customer’s engagement once they are decumulating their funds.
“Yes, retirement is a big thing for me at the moment – the dreaded time is looming up on me!! Sorting out my private pension is my priority this year. I am currently trying to manage it myself but with all the changes that have been made available to pensions since 2014, I am finding it impossible to decide how to proceed! The likes of robo-investment providers are all new to me and I need to seriously look into these as a way forward! Anything that is simple and easy to manage with low fees would suit me down to the ground.”
Age 60+, digital bank customer
The opportunity for providers and new entrants
There is a clear opportunity for pension providers and new fintech companies to develop apps that meet the current consumer needs of consolidation, speed, education and ongoing guidance. In tandem with this there is great potential to leverage new open banking legislation to provide retirement savings nudges at key life stages, provide normative benchmarks on pension savings for people on similar incomes, and generally increase engagement with pensions to ensure consumers have set aside enough funds for their retirement. UK consumers need to increase their pensions saving to adequately meet their retirement finance needs, and IFF’s Fintech Beacon can provide a clear roadmap for companies working in this space.
If you would like to discuss using our community to conduct your own cost effective and quick turn-around research, please contact financialservices@iffresearch or speak to one of our team on 020 7250 3035.