Five PenTech predictions for 2018
December 08, 2017
Prediction 1: Pension schemes will embrace personalisation to enrich the member experience
I expected that schemes' ability to employ sophisticated analytics on member data would lead to more personalisation. We have seen that happen, with many schemes building far more individualised communication strategies. Next year, expect to see the trend go even further. We are already deploying personalised video content for sponsor and trustee projects. I think there is a role for that kind of technology in many member interactions: design change, member option exercises, benefit statements, for example.
Prediction 2: Data and cyber security will become a prevalent issue
My forecast that cyber-security risk would rise up the agenda for pension funds and their advisers has proved accurate. High-profile situations across financial services have concentrated the minds of pension trustees and sponsors, who now expect robust cyber risk management strategies and defences.
The focus on data security will continue in 2018, with exacting General Data Protection Regulation (GDPR) coming into force next May. Whether it's anticipating what information hackers might target - and it's not necessarily sensitive financial details but sometimes simply databases of names and contact information - or reacting to the desire and rights of individuals who want their personal data handled carefully, this issue will become a mainstream and time-consuming area of focus.
Prediction 3: Pension freedoms and flexibilities will become the standard
My prediction was focused on defined benefit schemes and actually we have seen the desire to implement flexibility surge across DB and DC schemes. With some DB schemes offering record transfer-out values, it's clear it suits sponsors as much to extinguish legacy liabilities as it does members to have the freedom to use their pensions wealth as they wish.
In future, I expect pension funds to be more scientific about this process, embracing technology and non-pensions data to anticipate what individual members want from alternative arrangements, in order to create appropriate bespoke offers.
Prediction 4: Blockchain will move front and centre for the pensions industry
My prediction that the pensions industry would adopt blockchain technologies has proved to be a slow burner. That said, experiments with such "distributed ledger" technologies in areas such as scheme administration have been trialled.
Although yet to get off the ground widely, I still believe there are huge beneficial applications for the pensions industry. Being pragmatic, I am not going to hold myself to a short-term prediction this time round. Blockchain will eventually take hold, radically reduce administration costs and timelines, as well as improve security and transparency. But it is a complex area to understand and embrace. A decade from now, it will be prevalent and normal. Next year, the industry will still be figuring out what it all means and continuing to learn and experiment.
Prediction 5: Better use of common systems will drive down wasted costs
Last year's forecast is coming to fruition, but slowly. Well, 2017 was about "despacito", after all. I hoped common platforms, whether for member dashboards or tools such as Skyval for institutional analytics, would be used more, eliminating duplication and delays. It is still the inevitable direction of travel, but vested interests are slowing adoption of common, cost-efficient approaches which are advisor-agnostic.
Applying some self-scoring to last year's predictions, I'd give it a three and two halves - the halves for the two slow-burns. Let's go for at least 4.5 out of 5 for 2018.