AI (Artificial Intelligence) will transform the Pensions Industry. 

It is not something that is coming over the horizon. It is already here and is getting more powerful and useful by the minute.

We set out here a few observations on what the Pensions Industry needs to know about AI… 

How will AI disrupt the Pensions industry?

• Member engagement: Low saver engagement is one of the biggest areas of concern for pension providers.  AI could boost this by drafting clearer and more personalised member communications (or even more accessible general news updates – improving overall awareness and education). 
• The member experience: AI chatbots as first stage responders to member disputes/IDRP complaints anyone? Even if this doesn’t happen soon, it’s fairly easy to imagine an AI chatbot answering basic queries that members might have about their pension. 
• Administration: There are many AI tools that are simply super-powerful analytical machines so AI could help manage schemes’ data thereby making processes more efficient.  
• Governance: Trustees have significant governance duties. AI could help them keep abreast of all requirements to ensure compliance. AI should also be able to help with more accurate risk assessments – this will allow key stakeholders to identify (and remedy) potential risk areas. 
• Investment: this seems a key area where powerful data analysis could help decision-making. 

We can see that AI will disrupt the industry not only for the larger, more influential players but for all schemes and providers of all sizes and circumstances. AI could result in cost-effective and efficient solutions to some of the challenges smaller schemes face. 

What challenges are there? 

• Data: Any AI is only as good as the data it uses. Schemes hoping for AI to improve data accuracy will need to input sufficient (and high quality) data for the AI tools to review. 
• Cyber risk: With new technology comes new risks. Trustees will be aware of the risk of cyber security attacks. AI will result in a higher perceived level of threat to schemes. 
• Change: Will our industry grab the bull by the horns or does the very nature of a long-term saving product mean we are slow to embrace innovation and change? We believe we can be bold to improve outcomes for pension savers but more powerful AI will not drastically speed up widescale dashboard implementation, for example. 
• Perception: One concern is the danger of robo-advice. Is it appropriate for a pensioner to have their queries answered by an AI system? Perhaps liaising with a human builds confidence in the industry and this human touch should remain.  
• Duties: We cannot see AI replacing pension trustees and managers. Trustees have fiduciary duties which involve a human response and we would suggest that decisions based solely on data may not necessarily always be the best ones. Of course, there is also a more general point that an AI system is not a separate legal entity that can have duties placed upon it.  

What next?

We predict an increasing discussion about the use of AI in Pensions.  

The legislative landscape is changing (see here our flowchart on the EU AI Act: Navigating the EU AI Act: flowchart, Tom Whittaker, Brian Wong (burges-salmon.com)) therefore we recommend that trustees, employers and pension providers build their knowledge about AI and how regulation might affect them.  We have discussed the opportunities and risks of AI in Pensions as part of our Pensions Podcast series: The Burges Salmon Pensions Pod (burges-salmon.com)

Speak to your administrators and advisers and think about what risks it might bring as well as those it might reduce. 

We still see a role for trustees/providers (and advisers!) alongside enhanced technological solutions. We asked an AI programme to summarise the changes mentioned in the Pensions Regulator’s Response providing the General Code. It generated a response. We asked if the response was complete. This was its answer:

“No, my answer was not a complete list. I only summarised the key points […] if you want to learn more, you can read the full web page 😊” (emoji included!)

So… still room for helpful pensions professionals to interpret AI-generated information. 

If you would like to know more about AI in the pensions industry, please contact Chris Brown, or your usual Pensions contact. For the latest updates on AI law, regulation, and governance, see our AI blog at: AI: Burges Salmon blog (burges-salmon.com)

Written by Francesco Andres, Senior Apprentice Solicitor, and Chris Brown, both in the Pensions team at Burges Salmon.