The Internet will transform personal pensions distribution in the UK, according to a new Report by Forrester Research (Nasdaq: FORR). Open Finance providers will integrate pensions with other investments by stripping away the tax wrapper. Life companies must specialise and seek new partners as the industry becomes an eBusiness network.
“The Net simplifies personal pensions and opens up new distribution possibilities, while most personal pensions intermediaries don’t have a strong presence online,” said Benjamin Ensor, senior analyst at Forrester. “Pensions won’t be immune from the migration of consumers’ financial management to the Net. New online firms are already using the Net to unbundle investment products. Emerging Open Finance providers will simplify pensions by letting customers integrate their pensions into a single view of their financial lives. They are already repackaging products to suit different customer groups, integrating pensions into the overall investment mix and using online delivery to lower costs.”
Open Finance providers seek the most competitive partners to provide product elements like investment management and fund administration. As these new partnerships evolve, customer acquisition will be managed by Open Finance providers, investment performance will be manufactured by independent fund managers and account processing will be run by third-party administrators.
Forrester advises life companies to dismantle their integrated structure, freeing business units to specialise and interoperate with partners online. As partnerships become commonplace, the structure of the UK life and pensions industry will evolve to become what Forrester terms an eBusiness network. Forrester defines eBusiness networks as resilient structures of interdependent players co-operating in real time over the Net.
Firms that can work smoothly with partners will thrive as pensions move online. To prepare for tomorrow’s eBusiness landscape, pensions firms must participate in industry marketplaces like The Exchange, implement straight-through processing and adopt emerging XML standards.
For the Report “Unwrapping UK Pensions,” Forrester spoke with executives at 30 of the UK’s largest life-assurance companies and the life-assurance divisions of the UK’s larger banks to find out how they expect the Net to change the provision of personal pensions in the UK.