The Pension Journey — Stage 1: First Steps

ABAKA
ABAKA
Aug 30, 2018 · 3 min read
Photo by Brooke Cagle on Unsplash

Did you know that a whopping 93% of the current UK workforce [1] is not on track for the retirement they want? And even with the legal minimum level of contributions paid in by the employer and the member, the chances are that this is will not be enough to provide for an adequate standard of living.

Whilst this is worrying on an individual basis, the collective impact on the Assets under Management is much more significant. Current estimates are that the UK will face a £25Trillion deficit by 2050 [2]. This is nearly 10 times the size of the current GDP and although it poses a potential risk — it also presents a significant opportunity —as the providers that invest in engagement now will reap the rewards in the long-term.

Given that the new batch of retirees circa 2050 are today’s millennials, the first step to capturing some of that market is to get those millennials thinking about and engaged with their money now. However, there are significant challenges as a PPI report released in July 2018 shows that millennials are deferring long-term savings in order to establish themselves as adults [3]. The definition of ‘established’ is rather subjective but involves income, relationship & family, and home ownership goals.

Auto-enrolment has helped with getting people to start saving, however, this has not yet been meaningfully translated into increased savings as the report notes that that heuristics, biases, myopia and overconfidence cause millennials to opt-out or to save below their needs.

So if we consider a millennial member who is taking the first step into the world of pensions, what are they foresee-ably looking to find out and what info is required to be provided?

Customer wants:

  • Definitions and Context
  • Needs Analysis
  • Online (Multi-channel) financial help

Provider must send:

  • Auto-enrolment notification
  • Online scheme disclosure materials
  • Welcome pack

For too long, the industry has used their compliance requirements as the communication touch points rather than putting the needs of the member first. This has to change. Millennials are managing upwards and expect industry to adapt to them and if, collectively, we continue to use disclosure materials as an engagement play — we are not going to close the savings gap.

So, let us explore how we can use technology to solve this. Imagine a scenario where an employee who is auto-enrolled in their workplace pension receives a Facebook Messenger notification on their phone to advise them that they have been signed-up rather than the standard hard-copy Welcome Pack (or, gasp, a PDF).

Upon that notification being opened, a chat dialogue then prompts the member to talk to an adviser and find out what exactly ‘auto-enrolment’ means and how it will impact them now and in the future. The adviser can evaluate the member to find out their financial literacy level and provide contextual advice and guidance based on the individual customer rather than a generic template.

What if that Messenger application allows the customer to pick up the conversation on Whatsapp or handover to their Amazon Alexa?

Obviously, there would not be nearly enough advisers to be at the end of the messenger app to help provide all new auto-enrolees with personal advice which is where artificial intelligence enters the picture. ABAKA has pioneered a Natural Language Understanding (NLU) module that specialises in financial dialogues on pensions — enabling existing pension providers to offer financial guidance or regulated advice to their customers. Rather than trying to keep communication as high-level as possible to encapsulate all recipients, you could provide accurate and contextual advice in real-time at scale.

However, engaging your new customers with real-time communication is only the first step. Once you have opened up a channel of communication, you can use AI to start to overcome the heuristics, biases, myopia and overconfidence that form the barriers to savings.

How we do this will be addressed in our next article of the series looking at the member lifecycle!

Visit us at www.abaka.me to find out more about how we assist financial institutions to engage, educate and empower their customers on pensions.

[1] Aegon 2015 ‘UK Readiness Report 2015 Retirement Survey’

[2] World Economic Forum 2017 ‘We’ll live to 100, how will we afford it?’

[3] Pensions Policy Institute 2018 ‘What limits workplace pension participation amongst threshold adults (aged 25–39)?’

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