Fredric Karlsson
AI is reshaping the way we work, and it’s hard to ignore. Since OpenAI launched ChatGPT a couple of years ago, everyone from senior business leaders to students have been able to access, use, and experiment with AI tools.
The rise of AI has sparked many ethical and practical questions, every conference will feature at least one session on the topic and it’s hard to avoid reading articles about what AI might mean for jobs and productivity. But what does AI mean to the pension industry?
Hope or hype?
We are all aware that historically, the pension industry has lagged behind digital banking, e-commerce and other tech-led industries, but where they go, pensions will follow...eventually. Does AI represent an opportunity to level up and close the technological gap between sectors?
Or is AI, in its current form, just a distraction, draining one of our most valuable resources - time.
Hope or hype? Perhaps it’s a bit of both. These questions are not just theoretical. We’ve posed them to both funds and members, and we’ll share the results in this article.
Gartner Hype Cycle
AI currently finds itself at the peak of expectations on the Gartner Hype Cycle. It’s nearly impossible to avoid in product messaging, as companies go to great lengths to highlight AI features in their products or solutions. And for good reason - it seems there’s a direct correlation between mentioning AI in corporate reports and a rise in share prices.
The number of times AI is mentioned in quarterly reports has grown exponentially – up 366% in 2023! Stock prices have risen with the AI tide as well. Companies that mentioned AI saw an average stock price increase of 4.6%, compared to 2.4% for those that didn’t (source: wallstreetzen.com).
What about the pensions industry?
As AI-driven products sweep into the market, where can the pension industry benefit?
In pensions, we see tangible opportunities for improvements in automation, operational efficiency and member experience – areas where we think AI can make a significant impact and solve real problems.
By proving AI's tangible benefits, we can encourage more than enthusiastic technophiles to adopt these technologies until they are commonplace across our industry.
The pensions industry has an opportunity to embrace the latest technology and integrate it into back-office operations, and it’s the people within our industry who will decide to take this step. The success of any member-facing AI solutions will depend mainly on what members think and their willingness to use AI.
Recently we took the opportunity to speak to both funds and members to get their opinions on AI. We surveyed 132 members of UK pension schemes and 55 pension schemes, and here’s what we discovered.
Let’s have a look at what members said…
Have you used any AI products or services in the past?
Only 9% of those surveyed had not used any AI product or service. The results clearly show members are used to AI across a multitude of uses – customer services, voice assistants and generative AI.
How often do you use AI Products or services?
AI usage is mainstream too. We can see that 85% of members use AI tools or technology at least a few times a month.
What is your main motivation for using AI?
How reliable do you find the information produced by AI?
What does this tell us? The results show a promising foundation to build upon. Members already use AI tools in various ways, which signals a growing acceptance of AI. This acceptance reinforces the opportunity we have in the pension industry to embrace AI.
We also asked for funds for their views…
Does your fund use any AI products or services to complete tasks at work?
Does the fund have any plans or thoughts about implementing AI?
What are the fund’s main motivators for using AI?
Immediately we can see there is a big disparity between members and pension funds. While the vast majority of members are adopting AI tools, hardly any funds are doing so. On a more positive note, almost all funds want to implement AI in the future, though 57% have no concrete plans yet.
When asked about the main motivations for using AI, the top responses were enhancing customer service and member experience (78%), increasing operational efficiency and reducing costs (73%) and automating tasks (60%).
The results indicate that while members are embracing AI and there is interest among funds, actual implementation remains limited. Despite this, the industry has a clear vision of the desired outcomes, which should be viewed as a huge positive.
That said, successfully implementing AI presents challenges. When asked about AI's limitations in products and services, both funds and members pointed to AI's inability to understand nuance and context (47% among members and 36% among funds). Funds also expressed concerns about the accuracy of AI output (28%), while members were concerned about originality and intellectual property (20%).
We also explored ethical considerations, asking funds and members to identify their top priorities. The answers were identical. Privacy and accountability emerged as the key ethical considerations to be the most mindful of.
Finally, we asked about the level of trust in AI. The responses were optimistic – 82% of members and 71 % of funds expressed positive views on their trust in AI.
Key insights
AI presents both opportunities and challenges for the pensions industry. While it isn't all hype, the key lies in finding the right use cases to drive tangible benefits, particularly in automation, operational efficiency, and member experience. Our survey shows that members are ready and willing to embrace AI, and while funds are showing interest, concrete implementation plans are still limited. To bridge this gap, we must focus on proving real benefits, addressing ethical concerns, and building trust in AI technologies.
This article was written following Heywood’s Chief Product and Technology Officer, Fredric Karlsson’s Keynote at the 2024 CLASS Conference held in July.
