The banking landscape is about to change beyond all recognition due to Open Banking and it is arguable these are the biggest changes we have seen in the last 20 years for consumers.
However, there’s another market that we should be preparing for with just as much anticipation. In the pensions market, the Government’s Pensions Dashboard project will fulfil a similar role in shaking up the industry by providing better access and insights
to consumers, and enforcing higher levels of innovation and customer service. Many in the industry will be excited about the opportunities provided to empower consumers, liberalise data, increase regulatory focus and digitise the customer experience.
These changes are very important for consumers. Analysis of UK pension trends indicates that pensioners will receive £9 billion a year more from their private pensions and annuities in five years’ time. The pensions world is transforming and more than ever
we are becoming responsible for our own savings. The Chartered Insurance Institute estimates that the total savings gap between the total amount of long term money saved, and the amount required for people to live at what they would deem a tolerable life,
is currently around £9 trillion.
In addition to this, the projected rise in incomes overall may mean a greater complexity for those managing multiple pension pots. This is unsurprising given the multiple pension pots we all accrue as we move jobs and this is only set to increase. Forrester
Research predicts that today's youngest workers will hold twelve to fifteen jobs in their lifetime. There is also a reported £3 billion in pension pots that is currently going unclaimed by consumers who have simply forgotten about their pension entitlements.
For consumers, the current way of keeping track of pension savings is a fragmented experience, and a barrier to effective personal financial management. As the pensions landscape evolves alongside demographic changes, factors like increasing longevity, lower
guaranteed pensions, and rising consumer expectations are all part of a changing financial services outlook and we must adapt. This is why many pensions providers are treating the Pensions Dashboard project as a real opportunity for upping service levels across
With all 64 million pension pots brought under one roof, individuals will be able to see all their entitlements in one place, and compare their service and benefit levels. It would be naïve to believe that this won’t mean a realignment of consumer priorities.
It’s set to take place in 2019, so the pensions industry has time some to plan and optimise the way it does business.
A new data challenge:
It is inevitable that there will be market challenges as well as opportunities – that’s the nature of change. The regulatory environment will evolve as GDPR takes hold in May 2018.
This will of course also have an impact on pensions and customer data. Pensions providers with outdated systems, or who know themselves to be remiss in their data governance, need to start on the path to understanding the Pensions Dashboard project and its
likely impact on business operations sooner rather than later.
The Government hopes that, when live, the project will offer the industry reduced administration, increased competition on a level playing field, and greater clarity surrounding the provision and nature of long-term savings products, since consumers will
be informed and more in control of their financial futures.
But, what is more, in order for the Pensions Dashboard to be useful for the end-user information needs to be accurate and up to date meaning pension customers need to see the value exchange when sharing their data with pension providers. Current distrust
and sceptical attitudes towards sharing data will need to shift to make government initiatives successful. However, helpfully, increased digitisation will bring more scrutiny to all industries which will foster trust and persuade customers to share more data
and update it regularly.
Research from Experian into the attitudes of the public towards data sharing demonstrates that customers will willingly share their data when they see that it is valued and that they receive something in return. For example the research found that 49% of
customers are prepared to give their data to brands they trust, while 69% were happy for brands to use their personal information to send them discounts on products and services that they really want.
In order to do this, businesses must focus on developing meaningful customer experiences. Those that are successful will keep their existing customers and attract new ones. Pension organisations must also build the right technologies into their customer-facing
platforms to attract and then quickly respond to consumers. They can then be presented with offers tailored to their specific requirements.
The key to adding value with the customer falls into making sure businesses continually assess the following:
1. Build trust. Make it personal
2. Understand and provide value around customer data
3. Make the customer experience positively seamless and delightful
4. In uncertain times, assessing customer behaviour is crucial
Ultimately, the changes shaping the finance world due to Open Banking, and the new Pensions Dashboard is moving to a model rather like that of insurers – where aggregators and comparison sites are used by customers to research prices and rates. And while
the out and out winner overall should be the customer – it offers opportunities for providers too, if they’re open to respond to the challenge.