Pensions industry encouraged to embrace customer-oriented changes

UK pension market participants must work to understand and address the catalysts driving short–term retirement market change, according to a report from PwC.

The firm’s UK Retirement report urged the industry to become more customer-oriented by embracing changes such as the increased appetite for digital engagement, noting that the pandemic had already forced many in-person interactions online.

Similarly, PwC stressed that younger generations are more comfortable with fintech companies, with a survey from PwC Life Protection showing that customers under 35 were twice as likely as those over 55 to consider new providers and almost three times more likely to consider internet–based companies for long–term financial products.

The report speculated that younger generations might even trust an algorithm more than a human adviser due to the avoidance of unconscious bias, reasoning that this will boost usage of digital financial advice.

It also encouraged the industry to get to grips with increasing availability of data, noting that information such as transactions and savings data was becoming more available as the number of people using open banking swells.

PwC emphasised that this could be used to improve customer experiences, noting that digital advice solutions with access to more data would enable customers to access more personalised and better quality advice without having to expend extra effort.

While highlighting the importance of these technological shifts and advances, the report also urged the industry to consider the need for simplicity and education in its innovation, calling for changes such as increased transparency on pricing structures.

It explained: “Better customer education, simpler pension propositions and more digital advisory solutions will deliver a more effective market and improve pension services and engagement.”

PwC argued that poor financial education and low engagement were the root cause of “inefficiency in the UK pension market”, thus proposing that those who “stimulate active engagement with pensions earlier in the lifecycle and clearly outline options and trade–offs will see greater growth in assets under management”.

While it conceded that many pension providers offered generic pension primers on their websites and basic retirement calculators, the report encouraged the use of more complex means, such as interactive educational journeys with elements of gamification, as more likely to accelerate progress with engagement and education.

The report concluded: “Pension providers must work independently and with employers to offer more engaging, accessible information on options and services, and their consequences at retirement, appropriate to different audiences.

“Content and communications should make greater use of jargon–free narratives and utilise behavioural insights to encourage pension engagement throughout the lifecycle. Advice should be digital–first with human adviser options for those with complex needs.

“Ultimately, pension providers who offer simpler, lower–cost and accessible products will benefit from the confluence of changes across regulation, customer behaviour and digital adoption, and are more likely to see sustained growth in the future.”

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