At Smart, one of the reasons we were able to grow from zero to where we are now in just a few years was our approach to technology, as much as a focus on the technology itself.
Consider this, and try not to laugh at the absurdity of it all. In 1971, if you wanted to make a phone call, more often than not you’d walk to a public telephone and put coins into a slot. You didn’t just ‘call’ someone – instead, you’d ‘dial’ a number, by putting your finger into one of ten round holes and moving a circular piece of plastic in a clockwise direction. At the same time, you held a handset, made of something called bakelite, with your other hand.
It all sounds like something from a black and white TV sitcom, just one step up the evolutionary ladder from tin cans and bits of string, doesn’t it? In another 50 years it may be more likely you’d fly to the moon.
So if you take the person who finishes education and starts work this year – what is he or she going to think of today’s retirement saving technology when they look back in 50 years’ time? The uncomfortable truth is that as they draw down their savings in 2071, they’ll look back on today’s technology like we look back on public telephone boxes. They’ll wonder how on earth the business – and consumers – coped with what will, by then, look like the most absurdly antiquated systems and procedures.
We know that because, even now, the systems and technology the pension industry currently uses are, all too often, unfit for purpose and stretched to breaking point.
It’s all too easy for us, at Smart, to say so, of course. After all, we’re a fintech business specialising in the pension marketplace – and bringing pensions and retirement saving into the 21st century, through innovation and technology, is what we do. However, it’s obvious that what you might call ‘the legacy issue’ is going to become more and more of a headache across the entire pensions and retirement savings industry in the next few years.
It’s a problem that extends beyond just ‘legacy’ technology and extends into ‘legacy’ thinking, too. It has also reached a pressure point as we move from historical ‘defined benefit’ schemes to ‘defined contribution’.
So much of the technology in our industry needs modernising. To retrieve all the information that’s relevant to an individual’s pension account, especially in larger companies, is often nigh on impossible. Unfortunately, it would require such huge amounts of work and time to update the systems that many providers have, just to make them fit for purpose, that by the time they’d done the work, the technology would be out of date again. (And never mind the costs involved…) No wonder that solving this technology barrier is all too often filed away in the drawer marked ‘simply too difficult’ or the can that’s just kicked further down the road.
At the same time, engagement with those saving toward their retirement is still often limited to an annual statement from their provider, delivered on paper. Yet members are happy engaging with digital, technological and online solutions in all other aspects of their financial lives. Indeed that’s what they expect, need and want, whether for shopping, banking, buying insurance or making sure that they’re getting a good deal from their utility supplier. That the pension industry is already years behind in comparison is a problem that is only going to get worse, not better.
Perhaps the problem is one of perception more than anything else, and on both sides of the fence. Pension providers can chase after member ‘engagement’ as a perceived cure-all, but to do so without the tools to deliver it is entirely futile. As the industry evolves, not every provider will survive – some will go the way of bakelite and public telephone boxes.
Meanwhile, people don’t see the ongoing act of saving for retirement, or of taking their pension once they’ve finished their careers, in the same was as they think about major ‘discrete’ events milestones in their lives – getting married, say, having a child, setting up their own business or buying a first house.
However, retirement savings are intended to last you for 20 or 30 years of retirement, maybe more. Statistically, that’s longer than a lot of people have their first home, their own business or even their marriage.
If pensions and retirement are that important, then that’s why the industry needs to get things right. Moving to technology that keeps up with the times, rather than standing still in the past, is the answer.