At the ABI Retirement Conference in February 2015, I cheekily suggested half of the attendees might not have a job in five years’ time - or at least not the same job. Only a few people looked surprised.
It wasn’t a criticism of anyone there, or of their employers. It was simply a statement about the scale of the transformation the industry is currently going through. This, I believe, will result in a slimmer, simpler long-term savings industry.
As KPMG recently highlighted in Freeing the Future? Market Impacts of the Pension Freedom Reforms, the UK pensions industry has undergone 15 major changes in 17 years. With the Financial Advice Market Review and the green paper on the taxation of pensions, there’s plenty more change to come.
To its credit, the industry has shaped up well to the challenge of implementing pension freedoms in April. The government too should be credited for getting Pension Wise up and running, in the face of some scepticism. Both achievements were crucial to consumers being able to exercise their new freedoms.
However, to really enjoy the fruits of the revolution, consumers need to understand more and save more.
The first challenge is how they get appropriate advice or guidance. The second is how to get consumers to accumulate sufficient sums to afford them decent choices at retirement.
The pension revolution is a societal transformation – shifting the responsibility for retirement income onto consumers. Although the industry must also transform - to become more customer-centric and develop simple, transparent products that encourage long-term saving. It must engage with consumers in new ways that build trust, while becoming consumers’ preferred providers of guidance and aggregated information about their finances.
The companies that achieve this may well be those that transform their mindset - moving beyond rigid traditional channel boundaries to true customer-centric, omni channel solutions. They will almost certainly be the companies that use technology and data to provide better services. This may involve the provision of automated guidance - just what can ‘Robo-advice’ really do for customers? - or using data to segment their customer base down to the individual.
The pensions revolution will create huge opportunities for companies with the stomach and capacity for business model transformation, implementing regulatory changes whilst simultaneously innovating in their approach to products and consumers.