We consider how far away we are from an era of pensions digitalisation.
Although I don’t have a crystal ball, it’s clear recent digital transformation trends could transform the role of pensions trustees in two obvious areas:
Many pension consultancies have invested in technology and developed ‘real-time’ pensions analysis platforms in recent years – yet these platforms still rely on manual membership updates, payroll and asset funds information. To date, a system that connects all the data needed to produce an accurate funding valuation instantaneously, doesn’t exist.
However, I think we’re not far off fully adopting pension digitalisation. That would mean, for example, that a voice message informing the pension’s administrator that a member has passed away or has transferred out of the scheme would automatically be reflected in the real-time funding valuation.
The uptake of digitalisation in pensions could see a sharp increase following the Government’s recent Green Paper on security and sustainability of defined benefit pension schemes. The paper discusses whether the fifteen month timescale for completing valuations should be reduced. You can probably design, re-design and close a pension scheme in fifteen months.
Imagine if all pension schemes are required to have real time funding valuation platforms that automatically connect to the TPR's wider platform. Imagine, too, that the TPR has found a means of tracking the covenant strength of sponsoring employers in real time. Such information combined would provide a very valuable warning system, which would allow the TPR to make timely interventions. This could transform regulation.
Having real-time funding valuations and covenant strength assessments will also provide relevant and up-to-date information to trustee boards to act quickly. How many times as consultants have we been in negotiations with company trustees regarding their funding valuation from a year ago, where we already know the deficit has doubled in size and it’s too late to negotiate deficit contributions to improve past funding levels?
Recent research carried out by TPR, summarised in their 21st Century trusteeship and Governance paper published in 2016, flagged numerous reasons why some trustee boards are finding it increasingly challenging to meet the correct standards of governance. Given the regulator believes high standards of trusteeship and governance are essential to achieve good member outcomes, the ideal trustee board needs a:
Will we reach a point where Robo advisor or trustees join trustee boards? In my view, it’s not so very far off. After all, a Robo trustee would be TPR’s ideal trustee board candidate.
Just think of the curriculum vitae:
I think it’s highly likely that part of our future role as pension consultants will be to programme, support and work alongside artificial intelligence (AI).
I also see Robo trustees as being the most efficient when put in charge of all the time consuming administrative tasks such as:
Our world is evolving so fast that we need to take the time now to rethink how we harness current technology to make the most of the opportunities ahead.