Pension schemes and providers need to strengthen their understanding of where artificial intelligence (AI) is being used in operations, what data it has access to, who is accountable, and what happens when something goes wrong, according to Penfold.

The warning follows a recent survey from the Society of Pension Professionals that found universal AI usage across the pensions industry.

The Pensions Regulator also outlined its expectations for the responsible use of AI in its AI Plan published in May.

Penfold explained that AI is now being used across scheme operations including administration, communications, analytics, fraud detection and document processing.

The provider suggested that schemes should establish a governance response around AI.

This should include identifying where the technology is being used across operations and by third-party providers, and putting an accountability framework in place to define who is responsible for approving and challenging AI.

As part of the response, schemes should assess what member data AI systems can access, audit suppliers' AI governance processes, identify which AI-generated outputs could affect member outcomes, and set up consistent monitoring of AI usage.

Penfold CEO, Chris Eastwood, commented: “AI has enormous potential to improve how pension schemes operate and communicate with members. But realising that potential requires providers to stay in control: understanding where AI is being used, how its outputs are being assessed, and who is accountable when something goes wrong.”

Eastwood added that AI is increasingly being incorporated into third-party administration, consultancy and communications platforms, making it more difficult to identify where and how it is being used.

“Therefore, pension schemes and providers need to be asking the core questions. Where is AI being used across their network, what member data is being accessed, what controls are in place, and how are AI-generated outputs being assessed?,” he said.

Eastwood concluded that organisations remain responsible for overseeing AI use, even when the technology is provided by a third party.

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