Pensions have changed significantly in recent times. In days gone by, you worked for a company or two throughout your life and were rewarded with a percentage of your salary (and possibly a gold watch) to augment your state pension and see you comfortably through your twilight years. Now, the onus is increasingly on employees to prepare for their own retirement, and they are looking to employers to help accommodate this. Fintech firms are keen to participate and help employees take control of their financial futures.
With an eye on these developments, The Financial Services Forum, supported by Teamspirit, hosted an event on 22 February looking at fintech and the workplace. The event was chaired by Natalie Orringe (Group Innovation Director at Teamspirit), and the speakers were: Shri Rengasemy (Principal, Mercer); Samantha Seaton (CEO, Moneyhub); Andrew Evans (Founder and CEO, Smart Pension); and Andrew Scott (Principal, The R&D Lab, Vitality). The attendees explored the role fintech firms will play in increasing employee engagement and empowerment, as the responsibility for preparing for retirement shifts from the government to individuals and employers.
There are a number of general challenges facing the retirement system today. Foremost among these are:
- Inadequate savings rates (individuals not putting a sufficient proportion of their income aside to match their retirement expectations);
- Lack of financial literacy (individuals not being sufficiently equipped to act as their own investment managers, actuaries, and insurers); and
- Investment returns falling short of expectations.
Added to this is the increasing number of ‘sandwich’ households (in which the breadwinners are caring for their elderly parents as well as their children), low wage growth, substantial student and household debt, rising housing costs, and general economic uncertainty.
The result is a workforce that is often ill‐prepared financially for unexpected costs or is even struggling to manage daily expenses, let alone save for retirement (indeed, there is often little incentive to invest in a low-yielding retirement scheme when carrying a substantial burden of high interest debt).
This affects employers, as individuals who are worried about their finances will often be less engaged at work, and more likely to leave a job for even a small increase in benefits elsewhere. The result is employers increasingly focusing on their staff’s financial wellbeing, through financial wellness programmes. This could augur more bespoke benefits packages – many employees have reported wanting to reduce some benefits in favour of others, as well as a desire for easy‐to‐use tools to help them manage their finances. As most employees have confidence in their employer to give them sound financial advice, there could well be a role for employers to play here.
Fintech firms are developing platforms that give employees more direct control over their financial wellbeing. One example is Moneyhub’s ‘Smart Nudges’ AI app; designed to be user‐friendly and engaging, it categorises and tracks income and spending and offers the user the ability to tweak their financial behaviour based on changing income and outgoings. Meanwhile, Smart Pension’s platform can be used in tandem with current technologies (such as Alexa), thereby maximising usability. These platforms can help employees create and achieve goals, ease the admin process, and help save employees money, all within a secure operating environment.