Artificial Intelligence presents opportunities for pension schemes, but risks must be carefully managed

A PLSA survey found its members expect pension funds to have widely adopted AI by 2035 to enhance member engagement and communication strategies (79%), detect and prevent fraud (75%), improve data security (72%), personalise retirement planning (including advice and guidance) (63%) and allow customisation of investment strategies (59%).

In evidence submitted to the Treasury Committee’s AI in Financial Services inquiry, the PLSA said it believes the most compelling use for AI within pensions is improving communication and engagement between pension schemes and their members.

Using scheme and member data, AI tools can help to create personalised communications to scheme members about their pension. In other cases, AI chatbots can help to provide accessible and affordable financial guidance to scheme members.

Operationally, AI can improve administrative efficiency (such as by taking meeting minutes and document summarising) and enhancing trustee decision making (such as by providing data analysis to inform investment strategy and training trustees in other areas of their roles).

The potential for AI to help schemes have better engagement with members, improve efficiency and drive down costs means that more and more schemes will seek to integrate AI into their business models.

However, although the benefits are many and varied, AI adoption is not without risk. The PLSA warns pension schemes must adopt robust processes and strict protocols to mitigate the risks of data breach, cyber-attack, regulatory non-compliance, financial loss and other saver harms.

Due to the strong regulatory environment in which the UK pensions industry operates, which necessitates human accountability and strong governance mechanisms, AI is unlikely to be solely responsible for end-to-end decision making in the foreseeable future, with human agents likely to remain central to decision making across the industry, the PLSA’s submission says.

Given the inherent risks associated with the adoption of AI, the PLSA believes it is essential that trustees remain responsible and accountable for delivering all fiduciary duties to savers.

The PLSA is committed to supporting its members in the adoption of new AI technologies by producing guidance about the risks and opportunities, as well as working with regulators to ensure the supervisory regime evolves with the technology and savers are suitably protected from harm.

Zoe Alexander, Director of Policy and Advocacy at the PLSA, said: “The adoption of AI throughout the pensions industry should be viewed as a positive development. AI is already reducing costs for schemes and members by increasing efficiency, improving communications and member engagement – to the ultimate benefit of savers. However, there are significant cyber security, fraud and data privacy concerns that any scheme adopting AI must look to mitigate.”

Click here to read the PLSA’s submission to the AI in Financial Services Inquiry in full.

Mark Smith, Head of Media Relations
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Cali Sullivan, Senior PR Manager
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