Eight innovations that will revolutionise your pension

Tech­nol­o­gy is rev­o­lu­tion­is­ing pen­sions, in some cas­es slow­ly, in oth­ers incred­i­bly quick­ly. 

The biggest tech inno­va­tion of all is the pen­sions dash­board ini­tia­tive, which will require pen­sion providers to feed their data into a cen­tralised hub to give a sin­gle view of all your pen­sions. This project has been years in devel­op­ment and will only start rolling out with the sim­plest defined con­tri­bu­tion (DC) pen­sions from 2023. But there are plen­ty more inno­va­tions com­ing down the line that are chang­ing the way we save for retire­ment.

Hear and now

1 Become a shareholder activist

Pen­sion savers with Avi­va and Legal & Gen­er­al can have their say on share­hold­er res­o­lu­tions around issues as diverse as cli­mate change, exec­u­tive pay and child labour, through tech­nol­o­gy from fin­tech start­up Tume­lo. The tech­nol­o­gy, which is being adopt­ed by Avi­va and Legal & Gen­er­al, who are pilot­ing it with a lim­it­ed num­ber of employ­ers, allows mem­bers to see all the com­pa­nies in their invest­ment port­fo­lio and cast advi­so­ry votes on con­tentious res­o­lu­tions relat­ing to them. 

The savers are informed about new votes and vote results via email or in-app noti­fi­ca­tions and the providers take the votes into account when for­mu­lat­ing their own vot­ing strat­e­gy. Ear­ly tri­als have seen sig­nif­i­cant investor engage­ment in share­hold­er votes on issues such as the pay pack­et of Sports Direct chief exec­u­tive Mike Ash­ley. Providers offer­ing Tume­lo say it helps scheme mem­bers under­stand what it is they are invest­ing in and rais­es aware­ness of the role of share­hold­ers in respon­si­ble invest­ment. 

2 Keep assets in the pension tax wrapper for longer

Income draw­down cus­tomers are able to max­imise the tax effi­cien­cy of their pen­sion wrap­per by only with­draw­ing what they need thanks to an open bank­ing inter­face used by provider SEI. 

Steve Charl­ton, DC man­ag­ing direc­tor at SEI, says: “His­tor­i­cal­ly, draw­down investors have had to spec­i­fy a fixed amount to be paid into their account each month. Thanks to open bank­ing you can now fix a lev­el to which your bank account can be topped up each month, mean­ing if you spend less, you can keep more in your pen­sion where it ben­e­fits from tax-free growth.”

3 Beer today for beer tomorrow?

Finan­cial aggre­ga­tion plat­form Mon­ey­hub offers the abil­i­ty to set up a ”sweep­ing rule” that means each time the user spends £x on cof­fee, golf, beer or what­ev­er, a relat­ed amount, which can be half, all or 10 per cent, gets swept into a nom­i­nat­ed pen­sion account. 

“The sys­tem will also check the per­son can afford to do this with­out run­ning the account dry before the end of the month or week when they are next paid,” says Sam Seaton, chief exec­u­tive of Mon­ey­hub.

4 Sweep up old pots

With the aver­age UK work­er hav­ing 11 jobs through their work­ing life, so-called “strand­ed” pots from for­mer employ­ers are wide­spread. Providers are keen for you to roll these over into their own schemes and the sys­tem is get­ting faster every year, although it depends where the trans­fer is from and to. 

Robert Cochran, senior cor­po­rate pen­sion spe­cial­ist at Scot­tish Wid­ows, says: “If you are a Lloyds Bank­ing Group cus­tomer, which includes Bank of Scot­land and Hal­i­fax, you are pre-authen­ti­cat­ed so you only need four bits of infor­ma­tion to trans­fer a pen­sion: the name of your employ­er, an approx­i­mate val­ue, the name of the scheme and your date of birth. It’s pos­si­ble to clean up a left-behind pen­sion pot in six min­utes.”

Clare Reil­ly, chief engage­ment offi­cer at online con­sol­ida­tor Pen­sion­Bee, says trans­fers can take con­sid­er­ably longer, between ten days and two months depend­ing on the pen­sion admin­is­tra­tor pro­cess­ing the trans­fer. 

Coming Soon

5 VR view of your retirement

Employ­ees of J Sains­bury and oth­er big retail­ers will be giv­en a vir­tu­al real­i­ty view of their retire­ment thanks to a Legal & Gen­er­al pilot designed to help staff visu­alise how the amount they save will influ­ence their enjoy­ment of their retire­ment. 

A vir­tu­al real­i­ty head­set expe­ri­ence takes staff on a jour­ney through three dif­fer­ent hol­i­days – Brighton beach, a Mediter­ranean city break and an under­wa­ter scu­ba-div­ing expe­ri­ence – each rep­re­sent­ing the sorts of hol­i­day that can be expect­ed for those fol­low­ing low, medi­um and high­er con­tri­bu­tion sav­ings strate­gies, says John Bland of Pen­sion Geeks, a con­sul­tan­cy work­ing with L&G. 

The three des­ti­na­tions reflect the three cat­e­gories of retire­ment income – min­i­mum, mod­er­ate and com­fort­able – set by the pen­sions indus­try to help savers bench­mark sav­ings goals. Users are also able to explore a wind farm in 3D, to high­light some of the sus­tain­able invest­ments their pen­sion fund has invest­ed in.

6 Talk to a digital expert

Tak­ing the sort of voice recog­ni­tion soft­ware tech­niques used by Amazon’s Alexa to the next lev­el, Trulience could be bring­ing a dig­i­tal human expe­ri­ence to a pen­sion provider near you soon. 

“Dig­i­tal human” means an eeri­ly real­is­tic on-screen avatar that exists in-brows­er, with no need for down­loads, who can answer a range of ques­tions about your pen­sion. Cur­rent­ly being rolled out to employ­ers in Dubai, the tech­nol­o­gy will be avail­able for cus­tomers of the Smart Pen­sion Mas­ter Trust towards the end of 2021, says group man­ag­ing direc­tor Will Wynne.

On the horizon

7 Invest in a smart default fund

Intel­li­gent default funds are pre­dict­ed to rev­o­lu­tionise the way most of us invest in our pen­sions. Cur­rent­ly, more than nine out of ten peo­ple opt for the “default” fund, a fund set up by the scheme provider for those who don’t know what invest­ments they want. 

Default funds offer a one-size-fits-all invest­ment strat­e­gy designed to be more or less OK for every­body, but they are not the best for some, tak­ing a line of best fit between investors want­i­ng to take their pen­sion as a cash lump sum, buy an annu­ity or remain invest­ed through income draw­down. 

Some pen­sion com­pa­nies are part of big­ger organ­i­sa­tions that already have a sub­stan­tial amount of infor­ma­tion about us, such as post code, salary and, in some cas­es, med­ical his­to­ry. And where indi­vid­u­als agree to share their data through open bank­ing pro­to­cols, a greater degree of per­son­al­i­sa­tion is pos­si­ble. Data such as propen­si­ty to clear cred­it card debt, atti­tude to over­drafts and cred­it rat­ings can give as accu­rate a pic­ture of an individual’s atti­tude to risk as a psy­cho­me­t­ric ques­tion­naire. In future, pen­sion defaults are expect­ed to farm all this data to give indi­vid­u­als per­son­alised default invest­ment options. 

Richard Butch­er, chair of the Pen­sions and Life­time Sav­ings Asso­ci­a­tion, says: “Per­son­alised defaults are no more risky than stan­dard defaults and they pro­duce bet­ter out­comes for pen­sion scheme mem­bers. At the moment most trustees are resis­tant to the idea, but once one scheme intro­duces them, oth­ers will fol­low.”

8 Low-cost retirement advice

Every year hun­dreds of thou­sands of UK savers tran­si­tion into retire­ment with­out finan­cial advice, instead rely­ing on inter­pret­ing “finan­cial guid­ance” offered by providers that does not give them a per­son­alised rec­om­men­da­tion based on their unique cir­cum­stances. 

Aon is devel­op­ing its Well One Mon­ey app to be able to deliv­er full reg­u­lat­ed finan­cial advice for pen­sion savers at a price point in the low hun­dreds of pounds, a frac­tion of the price typ­i­cal­ly paid, says Ben Roe, senior part­ner and head of DC con­sult­ing at Aon.