New data today. Record numbers are using the internet.
— Alistair McQueen (@HelloMcQueen) August 7, 2020
I was interviewed yesterday by a young lad from Johnston Greer called Lewis Campbell. I’ll share next week. On several occasions I was asked for examples of people who I admire for promoting pensions and I came back to Alistair McQueen. He has the knack of asking the right question in the right way and here he is at his best.
Back to the age of printers?
It’s been one of those weeks. We’ve been dragging printers out of cupboards and borrowing them from friends. Why? Because if you want to make an inquiry on pensions, you may have to send it in by post.
I ask you, what good is it the Law Commission requiring British businesses to accept e-signatures, if you can’t send a request to a company by email?
This blog does not contest Alistair’s contention. It asks why the pension consumer is so poorly served by the internet.
A commercial imperative for change?
The problem for pension consumers is that there is no commercial imperative for pension providers to update their processes for a digital age. Whereas other retailers depend on your digital footfall for future custom, pension firms make money on your money when you are not around. The less the pension firm sees of you the better.
For all the talk of engagement, the thought that consumers actually want to know what is going on with their money, fills many pension firms with dismay. That’s because their financial forecasts deliver margin based on a low claims-experience. A claim in this context is any kind of client interaction which gives rise to a manual intervention.
What is worse, rather than investing to eliminate manual intervention, most firms suppress claims by making it as hard as possible for customers or their agents to get to the information needed to work out how their fund has done.
This is not just the case for individual inquiries. It is extremely difficult for employers to find out how their work-forces have fared saving into multi-employer schemes. Only where an employer has set up its own pension trust can it have primacy over staff data and even then they are dependent on service agreements with third party administrators.
In short, our experience is that while most pension firms are uncomfortable with claims either on the money or data they hold on their customers behalf.
The dashboard – our pensions Crossrail?
Recognizing that there is no commercial imperative for pension firms to digitize, the DWP is in the process of mandating change. The Pension Dashboard Programme will be empowered by the forthcoming Pension Schemes Act to demand that data be available first to a Government Dashboard and then to commercial dashboard, on presentation of a digital certificate authenticating the request.
However, the process of unlocking our data is being frustrated by delays in pre-determining what data is available and how it is presented. Arguments are breaking out about how much access to data private sector dashboards should have and the net result is that change is happening at a snails pace. Indeed the delays in the legislative process are meaning that the Pensions Dashboard Programme is becoming our pension Crossrail.
The public was promised Crossrail by December 2018 and the Dashboard a year later. Crossrail now expects to be fully open by December 2022, we have no timeline for the Dashboard. Without a commercial imperative or mandation, the pensions industry can sit on its customers data and cash indefinitely.
The pandemic should have increased digitization – not held it back.
The delays in the Pensions Scheme’s Bill passage through parliament are being blamed upon Covid-19. but Covid-19 should not be holding back insurer’s spend on research, development and implementation of digital access to our pension data.
One senior executive told me last month that her company no longer had the budget to develop APIs due to decreasing revenues from a fall in the markets. Linking customer service to the volatility of the markets is a worrying concept, the executive was in earnest.
The pandemic showed some providers having no digital plan B
The fragility of that service and disaster recovery was exposed by Covid-19. At least two insurers were unable to service basic customer needs in late March and April because they had no capacity for homeworking.
For all the talk of straight through processing, the pandemic showed that some of our largest firms were still requiring manual processes based on centralized call centers working on mainframe systems. The lack of agility was also worrying +++ as was the lack of accountability for those responsible for the maintenance of services+++as was the acceptance of failure from trustees and IGCs.
The failure of certain firms to maintain telephony in the key weeks of March and April when markets were plummeting should not be forgotten by the firm’s executives, fiduciaries or customers.
Dragging pensions out of the stone age
Managing pensions is a profitable business. Margins may not be quite as high as in the funds industry but it is still possible to make a decent margin from running a funds platform for open and closed pension books. Witness the success of the pension consolidator Phoenix and the inexorable rise of master trusts such Lifesight and Smart and (at a consumer level) Pension Bee
If there is hope that pensions can be dragged out of the stone age, it may be because there is capital outside of pensions that can be committed to researching , developing and implementing new systems that are built with API layers integrated into them.
If the mindset of the new administrators starts with the presumption that every process can be automated, then manual processes will be phased out. Consumers will find that they can view and manage their investments with the automation they expect for their home.
Looking at the ONS data makes sorry reading. Accessing investment or pension data does not figure in the top 20 items. Internet banking is now used by 76% of us , up from 30% in 2007. Open banking is a reality but open pensions seem further away than Crossrail.
It will be down to a few thought and business leaders, such as Alistair McQueen to change things. I would like to think his firm, Aviva- would be in the van.