For this special live recorded webinar brought to you by The Fintech Times, Editor-in-Chief Gina Clarke sat down with Dan McLaughlin, Director of International at Smart Pension, Charles Delingpole, CEO at ComplyAdvantage and Emma Douglas, Head of DC at Legal and General Investment Management to discuss the future of retirement and regulation.
Developments in the regulation of pensions, lifetime ISAs and new digital ways of investing mean that the concept of retirement is now truly on the radar of young people. With the acceleration of investment in the sector and global opportunities on the horizon, this panel will look to address trends across pensions – including ease of use, government legislation and new regulation that could potentially help, or hinder, the market.
To watch the webinar in full, click here.
The discussion kicked off with Gina asking whether new technology is playing a factor in young people’s interest in pensions, with Emma agreeing that fintech adoption is driving younger generations uptake of pension technologies.
She said “ If you’d have asked me this a couple of years ago I wouldn’t have said that, as the engagement was really low. Auto-enrolment was brilliant because it gets people into a pension, but it was apathy keeping them there. I do think now members are getting quite fired about what they can do with their money, and we’ve worked with fintech platform Tumelo so that members can actually indicate how they would vote on key issues on the companies that they hold. That has really engaged the younger demographic, with the most engagement and most votes from the 25-34-year-olds.”
For Smart, though they do have young people getting involved, currently they are finding the most engagement is coming from the middle age group.
Dan said: “People start to really worry about their pensions and retirement when you’re in your mid-40’s.”
He did, however, agree with Emma that the types of investments that are being made is the best way to increase consumer engagement with their pensions. “I think purpose-driven and belief-driven investments are really going to drive peoples motivations for engaging with any service, especially a digital service. I think in terms of adoption and young people, is that you’ve got to make the digital experience what people expect these days.
“There are lots of fantastic technology companies around the world doing wonderful things in all different ways, so why not the same in pensions and retirement?”
The conversation moved to how COVID has affected the pensions sector, with Emma advising that it has made people think a lot more about their savings.
She said: “My world is the world of pensions, and auto-enrolment has absolutely transformed that world, now being up to 8% contribution. I do think that we could do with that amount being higher for most people, but I think what COVID has shown us is that there were so many people who didn’t have any savings to fall back on. I think that’s why we’ve seen a lot of discussion around things like sidecar savings and trying to get people in that savings habit.
“We’ve had quite a lot of people who’ve been made redundant who are members of our pensions schemes call our helpline to get their money out, but they can’t unless they’re over 55. I’m certainly in favour of some kind of safety net for people, like having an ISA alongside a pension, but sometimes you’ve got the issue that people actually haven’t got that much spare money. So where do you put it, and auto-enrolment tells you you’re putting it into a pension, rather than short term savings but you know we know people need both is just in this time of crisis, it’s been quite horrible seeing how people haven’t got the short term savings to fall back on.
Emma’s mention of Auto-enrollment sparked further conversation within the panel, as while they all agreed it was a good thing to get people involved with pensions, Charles worried that the constant financial pressures on young people would have a very negative effect.
“Today’s graduates have the triple whammy of massive student loans, huge house prices and very meagre pensions,” he said. “The allocation of resources to today’s younger people is extremely poor, and they need to be protected.”
Moving on to the future of the sector, when asked what has been driving pensions forward in recent years Dan said: “I think the biggest driver has got to be the size of the challenge, the ever-growing problem where the world is getting older, there’s more people and government finances are getting worse to pay for peoples retirement. There’s a massive retirement gap emerging in terms of trillions of dollars that we need so people can have a dignified retirement.
“What we’re seeing as a trend now is a number of reforms and I think only for regulation can we solve the global problem.”
Finally, the discussion came to a close with Gina asking the panellists what they think we need to look out for in the retirement sector in the future; whether it was regulation, improvements in technology or education to the workforce. For Emma, it was “all of those things.”
She said: “We still need a lot in the pensions sector, so I absolutely think we’re going to see more regulation and more frameworks post-retirement. I think there’s still quite a long way to go on that form of regulation.
“We haven’t even talked about the pension dashboard, as being able to see all your pensions in one place is going to be so vital. I do think it’s quite sad now because when people do go online, they might use a pension projection tool and they’re probably only using it for their current employment. On average you work 11 different jobs in your lifetime, that’s 11 different pots all over the place that you’ll be able to see together. Getting a holistic picture of your wealth is just going to be so powerful going forward.”
For Charles, regulation in the form of state intervention will be key going forward in his opinion. “The lack of planning in terms of the fundamental structural-demographic shifts, like declining birth rates or economic growth, and therefore I think fundamentally there has to be some sort of state intervention to what extent overall numbers add up for pension allocation for the next few years.”
Finally, Dan agreed with Emma that the pensions dashboard is something to look out for in the future. “Through technology API’s, if it’s very easy for anybody in this country to see all their pensions and make better choices that’s going to be the really big thing. With technology coming in to make something really easy and getting rid of the complexity, it’s going to be really interesting if we can get the dashboard going.”