As new research by Profile Pensions reveals that workers have forgotten or lost pensions worth £37bn, with as many as 1.6m pensions worth a typical £23,000 lying unclaimed and one in four under-55s admitting that they have lost track of at least one pension, Andrew Megson of My Pension Expert argues that more needs to be done to overcome people’s antipathy towards fintech in the pensions sector so they will be able to benefit from the Pension Dashboard next year.
Nowadays, financial technology (fintech) is a familiar face in the world of financial planning. Indeed, online banking, as well as challenger banks and contactless payment technologies are now commonplace in Britons’ day-to-day lives. Now, the vast majority (76%) of UK adults use online banking platforms to manage their funds. This marks a significant increase from 2010, when just 42% of UK adults used such technology.
Fintech has been particularly prevalent throughout the Covid-19 pandemic. As adults in the UK were urged to stay at home, these technologies proved vital to Britons looking to manage their financial affairs without visiting their local branch. Instead, use of fintech apps increased by 72% throughout the crisis, according to research from the deVere group.
Clearly, use of fintech is on the rise when it comes to managing many of our daily personal finance requirements. That said, these developments have yet to conquer the pension market.
In many ways, fintech has a lot to offer pension planners – namely, helping Britons track down their lost pension pots accumulated throughout their lifetime, and helping a third (34%) of Britons, who admitted losing track of how much was saved in their pension.
The Government pledged to develop a Pension Dashboard back in 2016, to equip pension planners with a better set of tools to manage their retirement finances. The Dashboard, which is expected to launch in 2023, will allow individuals to view all their pension information in one space, including pots they thought they had lost.
Given the issues that many individuals face managing their pension effectively, one would expect to see strong call for a fintech solution to this common problem. Remarkably, this is not the case.
Quite the contrary, according to recent research from My Pension Expert, surprisingly few (20%) understand what the Government’s platform is, or how it will work. Further, just 16% of respondents believe that the Dashboard will alter the ways in which they manage their pension, and only 21% believe that the tool will enable them to track down their lost pensions.
Worryingly this lack of engagement seems to go beyond just Government incentives. Beyond the Pension Dashboard, a large portion (60%) of respondents in the aforementioned My Pension Expert survey said that they were opposed to their personal pension provider introducing fintech to help them manage their pension online.
Although these technologies will make the plight of retirement planning much easier, clearly, there is a general reluctance amongst Britons to embrace new tools.
So, why is this the case?
There is a panoply of potential reasons why individuals might be hesitant to use fintech to manage their retirement finances. Chief amongst these is the fact that some older members of the population may not be as comfortable using technology more generally. As such, the thought of managing their retirement finances entirely online may be a stretch.
On the other side of the equation, for individuals who are adept at using technology, it may be a lack of trust driving their indifference. Given the number of fintech-related scandals reported in the media in recent years, as well as more general concerns about data privacy and regulatory issues, individuals may be understandably nervous about adding another digital tool to their arsenal when it comes to managing their finances.
Ultimately, it will take a collective effort to ensure that Britons are on board with new fintech developments in the retirement finance sector.
Firstly, the Government and the pension sector must work to build up awareness about the various benefits that both fintech and the Dashboard could offer savers. However, it is equally important that Britons are adequately prepared with the IT skills needed to make the most of the platform when it eventually arrives. In this regard, both pension providers and regulatory bodies could consider hosting informative sessions and online tutorials.
When all is said and done, innovations like the Pension Dashboard exist simply to make Britons’ lives easier. As such, the Government must ensure that it is accessible as possible. One possible avenue the public sector could explore would be to convert the platform into a handy app. Given that 87% of people aged 55 to 64 were reported to use a smartphone in 2020, it is likely that Britons would be keen to engage with retirement fintech, so long as it lands at their fingertips.
It is vital that the Government and pension providers alike are completely transparent with Britons. Undoubtedly, this will be the missing piece of the puzzle when it comes to fintech engagement, ensuring that individuals feel fully in control of the platforms they use to manage their finances, rather than the other way around.
*Andrew Megson is the Executive Chairman of My Pension Expert, the UK’s number one Advised Retirement Income Specialist. Founded in 2010, My Pension Expert specialises in providing independent advice to UK consumers about their pension plans – it arranges millions of pounds worth of retirement income options each week.