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Redington: reduce cost of retirement savings with technology

Redington: reduce cost of retirement savings with technology

Use of technology, such as electronic platforms, automated investment management, online customer services and product distribution, will significantly reduce the cost of delivering retirement savings, according to the Age of Responsibility report.

The report, published by pensions consultants Redington featured ideas to invigorate the UK retirement market. It claimed technology could help consumers feel more in control of their finances, allowing them to access their accounts and products at any time. Better understanding of their financial position will improve clients’ understanding of what they need from their adviser.

Individuals can use technology to help them track their pension contributions to reach an appropriate retirement savings target, which the report also suggested should be at least 15 per cent – well above the current auto-enrolment level of 2 per cent currently and the 2018 target of 8 per cent.

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Tim Horne, DC investment solutions manager at Schroders, said, “We need to embrace investment innovation to get the best outcomes for customers. Advisers need to work with their clients to help them become more comfortable with investment innovation.”

The most recent data from the Office for National Statistics (ONS) states that total e-commerce sales in the UK were valued at £492bn in 2012, up from £335bn in 2008. So the report argues the growing popularity of e-commerce offers great potential to transform the pension and retirement landscape.

Technological innovation has so far resulted in the growth of single aggregated platforms, model portfolios, and the use of decision scoring of customer profiles.

Andrew Firth, chief executive of Wealth Wizards, said, “In the next decade, if not sooner, we need people to be accessing their pensions online.”

Mr Firth went on to discuss that DC could only work if people take responsibility for their own retirement planning, and technology has a crucial role to play in the evolution of the DC pension landscape from passive individuals to active participants.

Costs can be lowered and greater flexibility can be achieved though increased use of technology. Platforms, for example, are able to facilitate access to multiple financial institutions, therefore enhancing buying power.

Young savers have the most to gain from increasing contributions to their pension pots now. Technology is a powerful mechanism to communicate and engage with young people, and could allow the financial services industry to become more relevant to the youngest generation of savers, the report suggests.