Recently, I was part of an expert panel at the World Pension Summit, run by Pensions & Investments, in The Hague.
The panel discussed the digitisation of defined contribution (DC). What is clear is that there is a great wave of change sweeping across the world, shifting older model defined benefit pensions to DC systems. DC is now the policy tool of choice in all corners of the world with, in some cases, auto-enrolment being the favoured delivery model. Indeed, the greater proportion of the $55+ trillion retirement market is in DC assets. This trend is now irreversible.
P&I’s event looked at how the digitisation of DC is critical to ensure we, as an industry, can deliver the outcomes that savers deserve. Put simply, and I made this point on the panel, digitisation of DC is not a ‘nice to have’, but a fundamental requirement for an effective and successful DC system. Those who make the move more quickly will undoubtedly be the winners.
This aligns strongly with my own experience in the industry. Recent events have accelerated digital transformation and pushed it up the Board agenda as financial institutions have been forced to adapt to the new economic climate. This is great news for savers as technology in DC delivers unmatched efficiencies, next-level engagement, control and transparency and a model that is future-proofed against any policy and regulatory framework.
As a platform offering technology solutions to exactly this problem, financial institutions, like Smart, have the ability to empower others across the globe to be successful in DC. From a report we published recently, The Future of Global Retirement, we spoke to over 6,000 savers and found that 72% of people want at least some involvement in managing their finances for retirement. We also found that for 49% of savers, being able to access their retirement account online is crucial when it comes to choosing a retirement plan provider. After all, long gone are the days of queuing on the high street, with RetireTech harnessing the power of digitisation to give users online inclusivity, globally.
Some of the historical challenges facing retirement generally but also DC are addressed through modern technology. Take data, for example – it really isn’t suitable to one day get around to thinking about your data strategy and how it can play a central role in a successful retirement proposition. Data is central to everything we do here at Smart and baked into the platform. Poor data or a lack of access to it do not allow for a successful DC proposition or experience. Harnessing the power of data is critical to member engagement. You cannot interact and have a modern experience if the data doesn't empower you as a retirement provider to communicate, engage and interact in a timely way with your savers. The market is changing, and quickly, with a move to more user, dare I say, customer-centric services. DC is no exception.
At Smart, we have the benefit of deep hindsight. In just a few short years, our own tech platform has gone from launch to supporting almost a million DC savers, with many millions more to come across the world. Based on this global experience, I thought it helpful to share three things that need to be integral to getting DC retirement digitised.
One of the questions that is frequently asked is ‘how are you creating a product that leads to better outcomes for your members?’ In other words, the industry needs to move from supply-side dominance to the demand-side, placing people, customers, at the heart of everything we do. As discussed in this blog post, data is essential to allow us to communicate with our members and offer this new service. Only a truly modern technology platform, with automation, self-service and the optimised use of data, will deliver this new paradigm.
We deploy new releases to the global platform constantly, through our continuous integration and deployment methodology. This is of major benefit to our platform clients. Rather than having to wait to add a new feature, interrupting those who wish to use the system, it can be rolled live with zero downtime, and either tested with a small number of users to gather further feedback and data, or made available to all users at once. New features can be turned on adding to the capabilities of the platform. Additionally, innovation is a fundamental part of how we operate at Smart. We have resources focused on innovation and are proud to have also launched Smart Retire, which creates a unique and personalised experience so savers can manage their income in retirement far more easily. Decumulation is a huge blind spot in the DC landscape and Smart Retire, which can be used by financial institutions around the world, solves this problem.
When people see a modern DC technology platform they sometimes think it is just a front-end. Mistake! The cloud-native API technology platform is, at its heart, the full suite of record-keeping capabilities. What is different is that business processes might be less visible, or indeed invisible, as opposed to many hands overseeing a particular function. Users can complete the full sign-up experience in around 90 seconds, in a market where it was common for the process to take weeks if not months. We’ve continued to build on that, and every focus we’ve made on efficiency and scalability has paid off in saved time and effort, both for us and for every employer, adviser and saver on the platform.
Technology is the only way to drive efficiency and cost-effectiveness in a space that calls for optimised operational capabilities and customer-centric services. Digitisation in DC pensions is not a case of ‘when’ – it is already happening. Financial institutions within the retirement industry and governments must, as DC is now the dominant model, adopt modern technology to ensure their success in a competitive and ever-evolving market.
You can read more about savers’ attitudes to retirement across the globe in ‘The Future of Global Retirement’ report.
Smart is a global savings and investments technology platform provider. Co-founded in 2014 by Andrew Evans, Group CEO, and Will Wynne, Group MD, it is one of the UK's largest providers of workplace pensions. Its award-winning master trust, Smart Pension, is overseen by independent professional trustees.
In 2020 Smart Pension was named Master Trust Offering of the Year at the Pension Age Awards. Other awards include DC Master Trust of the Year, DC Innovation of the Year and Retirement Innovation of the Year in the 2019 UK Pensions Awards. Smart Pension was also named European Pension Fund of the Year 2019 in the European Pension Awards.
Legal & General Investment Management (LGIM), J.P. Morgan, Link Group, Natixis Investment Managers, Barclays, Chrysalis Investments and DWS Group are all investors in Smart.
We tweet as @SmartPensionUK.
Contact the Smart press office on 020 8016 2553 or email [email protected]