Five key PenTech predictions for 2017
January 03, 2017
As one year draws to a close it’s customary to look back at its highlights. The past year has been tumultuous in many ways, including for pension fund trustees and corporate sponsors. Corporate failures, market volatility and unexpected political results have all caused uncertainty and new challenges in the pensions market. So I wanted to quickly turn attention to looking forwards instead of backwards.
Trustees and sponsoring companies have increasingly sought out innovation in an attempt to modernise the pensions experience for their members, and deliver better outcomes. One area that has seen much development over the past year is pensions technology – or PenTech. Looking to the year ahead, what are the technological developments that will further enhance the pensions industry in 2017?
Prediction One: An ability to extract data at an individual level will lead to increasing personalisation
Technologies already available on the market offer pension funds the chance to identify, assess and act upon data and analytics at a member level. The ability to customise actions using data at this level will allow pension funds to offer increasingly personalised benefits and communications to members. In 2017, flexibility and personalisation will be key in helping employers and trustees reshape and deliver benefits fairly for members, rather than providing a one-size-fits-all approach.
Prediction Two: Pensions funds will become increasingly aware of cyber security risk
Cyber-crime is a growing concern for all industries. But pension funds are particularly at risk, given the nature of data they are responsible for and the trillions of pounds involved. Proper preparation - and communication across the pensions industry - will be key to combating cyber threats. Trustees will need to understand the entire “eco-system” in which their member data exists and moves, ensuring appropriate protection is in place, as well as setting out a practical plan for responding to breaches. Equally, educating members about the risks - whether from cold-calling or online transactions - will be crucially important.
Prediction Three: Pension freedoms, or at least flexibilities, will become the byword for the DB market
In the DC market, members today are afforded greater flexibility on pensions than ever before and we expect this trend to further penetrate the DB market in 2017. Technology will be key to facilitating this, enabling sponsors and trustees to understand their member profiles in greater detail, and offer more personalised solutions to help them access their retirement income.
Prediction Four: The pensions industry will incorporate innovations from other markets
In 2017, we expect innovations from other markets start to infiltrate the pensions industry. One to look out for is blockchain. Blockchain technology allows for a digital ledger to be shared securely. For DC members, this could mean having easier and more intuitive control and management over savings and investments. For DB pension funds, blockchain will, over time, reduce the need for intermediaries in many cases, sweeping away a lot of complexity and streamlining costs.
Prediction Five: Better use of common systems will drive down wasted costs
For various reasons, the experience for pension trustees and sponsors has, over the last decade, often been one of conflict. However, the pendulum is swinging back and is allowing everyone to remember that typically a collaborative approach results in better pensions strategies. We’re already seeing increased collaboration between trustees and sponsors with technology at the forefront of this trend. One example is the use, which will increase over 2017, of common information and analytics platforms, bringing together disparate sources of information, allowing it to be presented in smarter ways, while saving cost. This will ensure all parties are working from a consistent starting point, leading to better decisions based on transparent and timely analysis.
Bringing all these predictions together, the point is PenTech in some form or another will play a greater role in 2017. In what way is it on your agenda?