93% of all UK households have internet access, according to the ONS. 87% of all adults access the internet daily. And 54% of over 65s have shopped online this year.
The era of smartphones combined with the power of superfast fibre and emerging 5G is transforming the country. We have never been more interconnected. It all started out with the Internet of Documents – the ability to access a variety of information via link directories like Yahoo and AOL. However, our virtual and physical worlds are now perpetually connected, including with people, across applications and via an array of smart devices. You can see who is ringing your front doorbell halfway across the world, warm your car seats while brushing your teeth and even look inside your fridge while in the office as you do some last minute food shopping.
The Internet of Things (IoT) is here and many of us use it every single day. It will make us more efficient, reduce our costs, improve our experience as customers and boost our productivity. However, will it ever pull the world of pensions into its vortex, or will we be the ones who got away?
A quick look at how IoT has transformed the world of banking and finance will help us appreciate why it is being touted as the next big thing and is in fact being called the ‘Internet of Everything’.
We are already connecting our finances through an ever growing number of smart and dumb devices: credit cards, ATMs, mobile apps, tap-to-pay mobile phones, card readers and smart watches. We can tap our smartwatch on a reader to pay for a tube ticket, buy a bottle of water out of an unmanned gym kiosk, hire a bicycle on the streets of London and even use biometric ID verification to access our bank via telephone and mobile apps. A number of banks have integrated with Alexa and Amazon Echo to offer voice banking features. You can check your balance, be notified of pending bills or check mortgage rates.
Financial services companies in turn are monitoring us via this network of information and devices. Insurance companies can insure us based on our driving patterns. Wearable sensors track employees in high risk areas in real-time to warn of potential threats and decrease fraud related to workplace accidents. Insurance companies are even exploring security, CO2 and moisture sensors for homes to limit their risk exposure.
On the positive side, IoT offers us an experience that is instant, contextual and provides insight. On the downside, we increasingly worry about security, privacy and control. The recent concerns around Amazon employees having access to recordings that could include violent, sexual or criminal behaviour is a good example of the repercussions of this interconnected world.
What can we learn from how IoT is being leveraged already to make some informed decisions on investment directions within the world of pensions?
The Pensions Dashboard is an excellent example of how IoT can be leveraged to add value within the industry.
The ability to pull together information across multiple pension arrangements, slice it in several ways and convert it into actionable intelligence is precisely the purpose behind IoT. However, this needs to be within a secure open standard environment, where data needs to be able to be channelled across multiple devices and manipulated into usable formats by a variety of organisations based on individual choice, and within legal parameters. Artificial Intelligence, immersive environments, gamification and analytics takes this experience to the next level.
The Pensions IoT needs access to clean core data: contribution rates, investment choices and personal assets under management. Only then can one leverage tools to make informed decisions, consolidate pots (virtually or physically), sweep funds to an arrangement with a better annual management charge (AMC), and access decision support frameworks.
A smartphone app is always interesting. However, in the world of IoT we need to be able to access our pensions via our watches, Alexa or a kiosk in the office. Why be paid a pension when we can make micro payments via a pensions virtual card on your smartphone? We all have our salaries credited to our personal bank accounts. Why not have our pension contributions credited to a personal pensions account? Addresses should be updated across multiple providers in real-time, as should data from death registers. Biometric ID verification will clamp down on fraud and remove the necessity for putting birth certificates, passports and driving licences in the post.
However, should we be thinking wider than merely pensions? Given the trusted relationship we have across our membership, could we connect to the extended IoT to create supernormal value for our members?
Other savings and retirement tools: better value ISAs, savings bonds and child trust funds?
Insurance products: Private medical, critical illness and income protection?
Discounted services: mobile phones, broadband, gas and electricity?
Retirement support: meals on wheels, online home visits and access to carers?
The Internet of Things can already transform the world of pensions. However, we cannot escape from the fact that until we clean our data and open this up within a secure open architecture network of applications and devices, our options are limited. This could create a clear bifurcation into the haves and have nots.
On the one hand we have the brand new Master Trusts sitting on new technology platforms and current data. Many of them are pushing ahead exploring the world of IoT. The current government looks keen to push these players into opening up their networks within a secure environment to enable value added services to members.
However, many DB arrangements and legacy DC schemes are focused on a near term buy-out, too crippled with large deficits to consider investing in data and technologyenhancing projects or are just out-of-touch with this emerging reality. It may well be the pragmatic approach to provide these schemes either with a carve-out or a minimum set of conditions they need to fulfil. On the other hand, there may be challengers who will find ways to achieve the required ends in a cost effective manner – with a little legislative help from the Pensions Regulator and the Pensions Minister.
In the Internet of Things, transparency, speed, flexibility and innovation will flourish. We will have to embrace it or get out of the way. It is not a hoax. In fact, it is already here.
Head of Administration – Premier Pensions and Member of the PMI Advisory Council