8 mins read By Anton Padmasiri
In our previous blog, Anton traced the evolution of the SIPP from a niche product that holds anything from property to fine wine for HNWs to the essential tax-efficient account type of any wealth proposition. In pensions, there is a clear mismatch between what customers have come to expect as a digital customer experience (CX) and the legacy back-end systems that are supposed to enable it. So, here is our take on the harsh realities facing pensions tech today, as bridging this gap will impact the brand and bottom line for SIPP providers.
Disclaimer: All puns intended.
Keeping Up with the Regulations
Pensions tech faces the same broader technology challenges, as they apply to any other wealth vertical. While many processes remain analogue, digitalisation of customer experience is a time-consuming and expensive affair. The fact that very few SIPP tech options are available out there makes the buying decision a lesser of two evils.
Regulation change is continuous and constant and when you only have the on-prem route, it leads to long release cycles. Where system upgrades are developed, installed, regression tested, bugs-fixed, and re-introduced, you never really have an up-to-date system for very long. While this is a problem with any on-prem system, we feel it’s more of an issue for pensions because of the pace of regulatory change.
The Only Way is Fragmentation
Our second bugbear is the fragmentation of the value chain and the different technology components that have to come together to support a modern SIPP.
A day in the life of a SIPP provider requires stringing together several services to administer a basic SIPP—from opening accounts, taking money, clearing money, offering a universe of securities, trading them, supporting withdrawals, payroll integrations with HMRC, reporting to clients and regulators, taking fees and the list goes on. Currently, many specialist SIPP tech products do not include the ‘peripheral’ capabilities of trading, cash management, dividends and corporate actions, etc. Instead, you have to engage in block play using different brands of blocks, forcing different technology components together to try and fit your needs.
If customers were happy to be onboarded via manual application forms and PDFs, this may not pose a challenge, because it is a matter of putting bodies behind screens to input and process data. However, the lack of end-to-end capabilities inevitably compromises your customer experience, especially when your users have come to expect the seamless onboarding experience they get when signing up for the latest streaming service.
I’m an Inefficiency… Get Me Out of Here
Let’s get into the weeds now. Here’s a true-to-life scenario:
- I want to transfer my pension from A to B
- I fill in an application and email it to B
- B’s operations team will manually liaise via email with A and let it know about my request
- B needs A to confirm my request, how much I have, etc. via email
- Some back-and-forth communications take place
- And so it goes…
This process can take anything from two weeks to a year!
An important (and often unmentioned) side-effect of this is the financial loss to the consumer. For example, as a result of the above, I may have missed out on an investment opportunity because I didn’t get timely access to my funds. I’m not a happy customer. This type of inefficiency can impact your brand and reputation.
Throwing bodies at the problem can only take you so far, as a human’s capacity in this regard is limited compared to a machine. But it’s not just the process that is to blame—the problem also lies with the overall counterparties, with different pension schemes working to different service levels and so forth. So, you are helpless to provide a better service to your customer unless you can leverage modern technology to automate and streamline your basic processes and use your resources more efficiently.
So You Think You Can Drawdown
Post pension freedoms in 2015, drawdown is one of the main ways in which people access their pensions. This is predominantly, if not exclusively, an offline paper-based process. Very few organisations have a straight-through digital experience for enabling individuals to take their money out.
What does this mean? When I am ready to take my money out (to get tax-free cash to pay off my mortgage or supplement my regular employment income), I want to get hold of my money in a timely manner. Unfortunately, I am told it’s going to take me at least 20 days. Again, I am not a happy customer.
The decumulation side of pensions, which is a large market post-pension freedoms, remains almost exclusively offline. The only reason for this is that the tech solutions available to the pensions industry have not kept up with the modern capabilities, already prevalent across sister industries (banking and insurance) to enable seamless digital drawdown.
These problems just need some love and attention—leveraging modern technologies like the cloud and APIs to get your services communicating with each other, automating repetitive tasks, and orchestrating services to provide a seamless experience.
As it so happens, WealthOS has creatively leveraged modern technology to bring your customer experience into the modern age. Our platform is cloud-native, so you have shorter release cycles. We have fully orchestrated workflows and our open API layer makes building great CX a breeze. We have all the capabilities needed to run a SIPP under a single hood to avoid tech fragmentation. Get in touch with us – firstname.lastname@example.org if you would like to learn more.