Has retirement technology been left behind in the 21st century?

Dri­ven by a wave of dis­rup­tive fin­tech star­tups in areas like neo bank­ing, pay­ments and insurtech, the finan­cial ser­vices indus­try has been forced to embrace dig­i­tal trans­for­ma­tion over the last decade. Yet one of the largest mar­kets of all, pen­sions and retire­ment, has large­ly been left behind, over­looked with low­er-hang­ing fruit else­where.

By oper­at­ing in very much a long-term, high­ly reg­u­lat­ed sec­tor, incum­bent work­place pen­sion plat­forms have faced less pres­sure from out­side inno­va­tors than oth­er seg­ments of the mar­ket, cre­at­ing a retire­ment tech­nol­o­gy gap. Inno­va­tion, his­tor­i­cal­ly, did not need to be a core com­pe­ten­cy for most size­able retire­ment sav­ings providers, putting them off from invest­ing the large sums required to upgrade lega­cy sys­tems.

But the rapid­ly evolv­ing pen­sions land­scape has cre­at­ed an impe­tus for change. The rise of defined con­tri­bu­tion schemes, fuelled by auto-enrol­ment and reg­u­la­to­ry changes allow­ing more free­dom over pen­sion pots, has left employ­ers pay­ing over the odds due to the inef­fi­cient process­es of providers and their age­ing work­place pen­sion plat­forms.

“The pen­sion indus­try has quite an archa­ic way of think­ing about tech­nol­o­gy, where­as for most oth­er indus­tries tech­nol­o­gy is the thing you need to enable any­thing you are doing,” says Michael Watkins, direc­tor of retire­ment propo­si­tions at Smart, a lead­ing retire­ment tech­nol­o­gy provider in the UK. “It is only a mat­ter of time before a num­ber of pen­sion indus­try providers are caught out for hav­ing wait­ed too long to update their tech­nol­o­gy. If you don’t adapt to the sit­u­a­tion you are in, you will very quick­ly go bust.”

Even if a provider’s cur­rent soft­ware has been oper­at­ing as expect­ed, nec­es­sary upgrades and enhance­ments can be prob­lem­at­ic. Soft­ware intro­duced even just a few years ago is like­ly to be out of date by now, and many tech providers will charge extra for enhance­ments or new ver­sions and may no longer offer sup­port for old­er edi­tions.

For in-house sys­tems, it costs mon­ey to main­tain a ful­ly skilled tech sup­port team capa­ble of react­ing to these changes and imple­ment­ing reg­u­lar updates. In addi­tion, a bespoke sys­tem needs to be able to “talk” to many oth­er clients and providers to process trans­fers in and out. With­out sig­nif­i­cant invest­ment and scal­a­bil­i­ty, providers will find it hard to keep up with changes to oth­er sys­tems that are vital to their abil­i­ty to oper­ate.

“Most work­place pen­sion plat­forms are at least 16 years old and are often wealth plat­forms that then tried to do work­place pen­sions when sud­den­ly auto-enrol­ment arrived and meant more than ten mil­lion peo­ple need­ed to get one,” says Will Wynne, co-founder and group man­ag­ing direc­tor at Smart. “When it was just large com­pa­nies, it could sort of work because there was enough mon­ey for inef­fi­cient tech­nol­o­gy to still be prof­itable. When small­er employ­ers joined, the mar­ket was ter­ri­fied about scal­a­bil­i­ty.”

The broad­er pic­ture is that this is a chal­lenge which is not insur­mount­able. The ben­e­fits that tech­no­log­i­cal inno­va­tion has brought to oth­er finan­cial mar­kets can be viewed as incen­tives and oppor­tu­ni­ties for the pen­sions sec­tor, providers and con­sumers alike, cre­at­ing val­ue and effi­cien­cies and dri­ving bet­ter out­comes and com­pet­i­tive advan­tage.

With a back­ground in finance and high-scale ecom­merce plat­forms, the founders of Smart spot­ted an oppor­tu­ni­ty to cre­ate a more agile and cost-effi­cient pen­sions solu­tion that works at the vol­ume required. Design­ing its sys­tems from the ground up, and in the cloud, Smart reassem­bled the key pieces and reimag­ined user expe­ri­ence with tech­nol­o­gy at the heart. Cru­cial­ly, by releas­ing code up to 30 times a day, Smart can con­stant­ly iter­ate.

“We do a lot of research to under­stand what is work­ing, what is not work­ing, where are the pain­points, and then we can evolve and release new fea­tures, tweak­ing things as we go dai­ly,” says Wynne. “With the incum­bents, mean­while, if you are using one of the under­ly­ing soft­ware providers, you’ll be lucky to get quar­ter­ly updates. Typ­i­cal­ly, it’s bian­nu­al­ly or annu­al­ly. Then you might have to get a whole new ver­sion of the plat­form and be run­ning two dif­fer­ent types. We have one plat­form for the whole world and it can be con­fig­ured for every local mar­ket and client, wher­ev­er they might be locat­ed.”

A recent study by Smart high­light­ed the pace at which retire­ment is chang­ing, accel­er­at­ed fur­ther by coro­n­avirus, which has prompt­ed many to pay clos­er atten­tion to their retire­ment income. Some 13 per cent of over-55s said they plan to delay their retire­ment due to the pan­dem­ic. In the UK, specif­i­cal­ly, there is a grow­ing desire to man­age retire­ment sav­ing and spend­ing with­out any out­side assis­tance, ampli­fy­ing the need for solu­tions that help them under­stand their posi­tion and make bet­ter deci­sions.

In the same sur­vey, Smart and YouGov found more than half of UK adults aged 50-plus wor­ry about being able to afford their lifestyle when retir­ing, just one fifth see retire­ment as the sin­gle event it was the past and 47 per cent would pre­fer to man­age all their retire­ment finances them­selves. These sta­tis­tics reflect large shifts in the way peo­ple want to retire, inten­si­fy­ing the gap in the abil­i­ty and tech­nol­o­gy to guide them on the jour­ney.

Smart’s ful­ly inte­grat­ed dig­i­tal plat­form is approach­ing one mil­lion savers across the UK and oth­er coun­tries includ­ing the Repub­lic of Ire­land and Dubai. The team is cur­rent­ly hir­ing a fur­ther 100 engi­neers, sup­port­ing Smart’s fore­cast to reach ten mil­lion mem­bers on the plat­form with­in a cou­ple of years. This scale pro­vides unique insight into the behav­iour of mem­bers and inter­ac­tions with their sav­ings, which can be used in part­ner­ship with clients to improve the out­comes and over­all expe­ri­ence for mem­bers.

In the same way Smart has rev­o­lu­tionised the accu­mu­la­tion jour­ney, it is now rev­o­lu­tion­is­ing the decu­mu­la­tion jour­ney through its Smart Retire solu­tion, enabling indi­vid­u­als to chart their entire invest­ment life plan from begin­ning to the end.

“Retire­ments are no longer a one-off event and everybody’s is dif­fer­ent. As our sys­tems were built at the indi­vid­ual lev­el, we can per­son­alise every invest­ment jour­ney and strat­e­gy,” says Wynne. “When you get to the end of your work­ing life, you can take the mon­ey you have accu­mu­lat­ed, break it up and use it in a sen­si­ble, flex­i­ble way through the course of retire­ment. You can have per­son­alised invest­ment plan­ning all the way through your life and then flow that into retire­ment. That’s not been pos­si­ble until now: a tru­ly end-to-end life jour­ney that reflects your own cir­cum­stances, needs and beliefs.”

For more infor­ma­tion please vis­it www.smart.co

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