At present, when the average person on the street thinks about ‘speaking AI’, their mind will first probably go to the likes of Alexa – which provides you with an answer to a question. However, experts predict that this technology will soon be elapsed by ‘conversational AI’, which differs mainly in two ways to existing technology: 

1. It seeks to be more ‘human-like’, by varying its intonation and volume to the situation. So if you tell the AI that you had a bad day at work, it should respond softly and maybe more slowly, as a human would. 
2. It tries to understand you. For example, it might respond in the above situation by saying ‘but remember that [insert favourite football team] won last night!’ to try and lighten the mood, if it calculates that the user would respond well to this. (Although it may have to use a topic different from football performances if it wants to cheer up this Nottingham Forest fan most weeks!) 

This development is expected to result in the ‘conversational AI’ market growing from a value of $9.43bn in 2023 to $26.88bn in 2028. 

AI technology already in place in the Pensions industry

Already, there is some ‘speaking AI’ in the pensions industry. To give one example, if you have a pension with Smart Pension, then you are able to ask Alexa for real-time updates and to manage your pension without going online. For example, members can say to Alexa: “how are my investments doing?" (which will provide a quarterly report) and “update my contribution percentage to [number] percent" (which will do so once the member confirms specific details about themselves). 

Existing technology therefore already provides practical assistance for pension members industry and offers a useful base which conversational AI can build upon to take the use-case to the next level. 

How can ‘conversational AI’ impact the pensions industry?

Pension members may one day be able to enter into free-flowing conversations with their ‘conversational AI’ about their pension. For example, they could say to the AI, ‘I am wanting to retire in a few years, how best should I manage my pension?’. The AI (having potentially years and terabytes of knowledge about this person, including salary, pension pot value, and family situation) could then provide personal advice, delivered in an emotive way, to the person with options for what to do in approaching and after retirement.

Note that studies show, where advice is delivered with a “smiling voice”, then the recipient is more likely to trust and action it. 

Legal considerations

We anticipate that complex legal questions will arise when any company is considering permitting their AI technology to provide such ‘advice’ (including ensuring that any advice is compliant with Financial Services and Markets Act 2000 (FSMA)). 

The same question could be posed for pension schemes themselves. For example, trustees or providers of an occupational pension scheme might invest into a ‘conversational AI’ service for their members. In such an instance, how much advice would the AI be able to give, before having to refer the member to a regulated person? Or before the trustees are potentially in breach of their fiduciary duties? 

As per joint TPR and FCA guidance, trustees (whilst trying to assist members where possible in-line with their fiduciary duties) should “focus on offering help to employees in ways which do not involve arranging or advising” to ensure compliance with FSMA. More specifically, the guidance provides that trustees “cannot issue material that promotes a particular financial product” (though in the case of occupational pension schemes, they can provide “information on the merits of participating in” the scheme). 

This is just a snapshot of the regulation that parties are subject to when assisting pension scheme members, and additional complexities will arise where the advice is given by AI technology that the scheme uses. 

Comment

With AI technology evolving at a substantially faster pace than Moore’s Law (which broadly assumes that the capability of technology will double every two years), conversational AI might be common place in the pensions industry sooner than you think. Our pensions and AI specialist lawyers can provide training to providers, trustees and employers as an introduction to this complex and quickly developing area. 

We work closely with AI specialists from our firm and in the industry to understand how the technology is likely to impact our clients. Please do reach out to Chris Brown, Callum Duckmanton, or your usual Burges Salmon contact if you would like to discuss this further. 

For the latest updates on AI law, regulation, and governance, see our AI blog.

This article was written by Callum Duckmanton (Solicitor, and the Forest fan) and Chris Brown (Partner) both in our Pensions & Lifetime Savings Team.