Five influences driving pension funds to prioritise their digital customer experience (CX)
With over 34 million pension fund members and over £2 trillion of assets, the pension industry is no stranger to deploying change at scale. Whether that is the transition from defined benefits (DB) to defined contribution (DC) schemes for employees that has reshaped the pension landscape and dynamics, or changes to the regulatory environment. Add into the mix, challenging market conditions where yields and margins remain low, and it is clear the sector is one of continuous adaptation.
The digital transformation of customer experience (CX), and the associated impact on interactions between businesses and their customers, however, presents arguably the greatest evolution for the industry for some time. Lorna Glynn of Paragon Customer Communications, explores the critical influences driving its adoption and how pension funds are preparing for its deployment.
Perhaps one of the most observable impacts is the shifting Fund Members’ demographics of the pensions sector.
At one end of the scale, the UK's ageing population – with more than 24% of people living in the UK expected to be aged 65 or older by 2042, up from 18% in 2016, according to ONS figures – presents pension funds with a more senior member base who are far more engaged in their pensions, but less likely to use online services.
Contrastingly, the next generation of digitally-native Fund Members’, while less occupied by their pension, are increasingly looking for online services. Indeed, a study by PWC revealed that 62% of younger workers would welcome a portal offering a single view of their pension.
Embracing digital technology will be central to the efforts of pension managers seeking to seamlessly serve investors across a spectrum of demographics, each with distinctive requirements and preferences.
Government policy changes
Policy and regulatory changes have strictly, for a long time, dictated the processes of pension managers. And it certainly remains a key driver behind the digital transformation of CX in the sector.
The imminent Pension Scheme Bill 2019-2021 has created a legislative framework for pension digital portals that enable members to see all their pension savings in one place, in real time, so that individuals can make better decisions about their retirement plans.
According to UK research, the average person has 11 jobs in their working lifetime and as a result a multitude of past and present schemes to keep track of. With over £400m sitting in pension schemes that individuals have lost, these intuitive portals could allow members to re-connect to their lost pensions.
And while it is yet to be determined whether there should be a single portal provided impartially by The Money and Pensions Service (MaPS), or multiple portals provided by the Pension Funds themselves for more consumer choice, it is likely to fast-track digitisation and provide exciting new experiences and opportunities for the industry and fund members.
However, implementing a digital transformation road map and still balancing digitally-led interactions without losing the personal touch is a tricky tightrope to walk.
Of course, all of these developments exist against a backdrop of unprecedented short term market volatility and anticipated far reaching implications over the coming months and years. As has been widely reported in the media, the market reaction to the UK’s decision to leave the EU will undoubtedly have a lasting effect on the sector and force providers to re-think their communications strategies.
Even though the longer term repercussions of Brexit are yet to be determined, the one certainty is that pension funds will have to be pro-active in their approach to manage the immediate volatility and longer-term uncertainty. Central to this will be enhancing their capabilities to communicate clearly with a broad age range of members, clearly explaining to members the work being completed, how it may impact member schemes, and the steps being taken to address these concerns.
Throughout all channels, communications will also need to indicate associations that can support certain groups, such as over 50s who are resident in the EU. With the UK Government warning around 220,000 UK citizens aged 65 plus living in the European Economic Area (EEA) at risk of losing access to their pension as a result of the no-deal Brexit outcome, directing members towards impartial advice is critical.
Hurdles to true digital transformation
The majority of pension funds are at the beginning of their journey into digital transformation, but the potential impact is undeniable. So why has the industry largely, until now, lagged behind more innovative sectors in their adoption of such digital innovations?
As digital transformation has progressed, it has become clear that there are specific underlying barriers that have prevented the widespread adoption of truly intuitive digital CX within the sector. Whether that is traditionalism in senior management and culture, legacy systems, or a lack of interoperability, each have prohibited digital advancement for some time.
Convoluted IT frameworks and costly outdated systems that provide an inadequate delivery infrastructure to support cloud-based services like AI and data analytics, for instance, pose a major challenge. They can leave pension funds lacking the organisation-wide integration and alignment to drive the long-term success of digital transformation.
While firms are prioritising to accommodate mandatory regulatory pension changes over more creative and innovative programmes – a significant impediment for digital adoption. Similarly, a perceived lack of demand from customers on firms to provide digital services, often means pension managers focus on other areas of business development.
The benefits of digital CX
Perhaps the greatest influence on the adoption of digital CX is the wealth of digital tools at the disposal of today’s organisations. For organisations typically deep-rooted in more traditional service models, emerging technologies have lowered the barriers to entry for many firms seeking to provide the personalised and tailored messaging.
Deploying a cohesive eco-system of such technologies can afford firms a controlled perspective of their organisation-wide communication strategy, particularly as clients increasingly engage across a broader spectrum of digital channels. The result is the unification and consolidation of multiple communications technologies across the breadth of an organisation.
Particularly pertinent in these challenging economic times, the cost savings that can be derived through greater efficiencies can be especially valuable. Pension funds can maximise the value they can get from each individual channel, reaching customers and prospects via the channels or devices they prefer, all while saving themselves time and money.
Preparing for change
Paragon Customer Communications offers pension provides an alternative partnership to tackle business, technology and marketing challenges now and in the future.
By combining industry-leading services, together with advanced capabilities in data and analytics, creative communications and experience, as well as technology and automation – our expert team empower pension providers to maximise digital opportunities and drive a positive client experience for their customers.