Value of smart apps in pensions engagement
In a webinar that Scottish Widows staged to talk through its 2023 NRF study, the provider highlighted that in order to engage young people in pensions saving today they need to go to the places that this age group is.
So, that might mean opening up dialogue via TikTok.
However, it also means creating smart mobile apps so that they can explore what different pension savings regimes are likely to deliver in terms of a retirement income.
It should be possible to use new digital tools to engage them in setting retirement income targets, adding in projected state pension entitlements, and building resilience into their accumulation regime.
The same study uncovered the fact that across all age groups, 58 per cent do not know how much they will get from their state pension entitlements and when they will receive that money.
Yet significantly, more than half of UK people will be largely dependent on the state pension for the bulk of their retirement income, the Scottish Widows study confirmed.
Smart connectors into the Department for Work and Pensions' portal to check your state pension entitlement can also be created.
Young adults can be invited to put in other long-term investment details, select an age for prospective retirement and ask the app’s underlying calculator to produce some retirement income scenarios.
Static annual pension statements of today need to go live, interactive and become much more visual as soon as possible to work for the digitally connected generation.
Stochastics ideal for testing income resilience
Stochastic modelling can be applied to help young people build resilience into their pensions savings regime and close saving shortfalls.
The app could invite you to test the impact of different events on a selected portfolio profile. Scenario one might be ‘a market crash lasting two years’.
After all, market falls of one type or another are pretty common events if we look back to the shocks of 1992, 1997, 2000, and 2008-09 just in the past 30 years.
Stochastics have enough historical data to work with now to provide some pretty realistic estimates for the sort of damage this sort of event could do to typical equities-heavy portfolios, for example.
Stochastics work by running thousands of scenarios, using an element of randomness to calculate results.
This work is generally done in the cloud today for the added assurance of speed, availability and robustness.
Stochastics can be used to explore life event scenarios like a disability limiting a household income and savings levels for a period, or the need to fund care arrangements during later retirement.
A further scenario may include living longer than UK average mortality, which currently sits at 81.8 years for UK resident men and 85.5 for women in 2020, according to the ONS, or taking time off work to care for elderly parents.
