Lumera has warned that pension trustees and providers need stronger governance and controls when deploying artificial intelligence, as UK pension reforms increase demands on data use.
The insurer technology supplier said trustees and providers will need operating models that combine AI tools with clear human oversight to stay aligned with best practice, emerging guidance and standards. It said the UK’s principles-based approach to AI regulation places greater responsibility on firms to set their own frameworks rather than rely on a detailed rulebook.
The warning comes as the pensions sector faces a broader set of reforms expected to increase the volume of data schemes and providers must process and analyse. Lumera said changes linked to the Pension Schemes Act, the Targeted Support regime and possible further reforms following the Pensions Commission will add to pressure on firms to use data more effectively.
Areas likely to increase that pressure include default retirement pathways, value for money assessments and small pots consolidation. Lumera said these changes will require more automated decision-making, closer matching of records and more standardised benchmarking across larger, more complex datasets.
Governance focus
Lumera said firms should not treat AI adoption as a purely technical task, but should build clear governance frameworks around its use. Those frameworks should define where people review outputs, where intervention is required and how accountability is assigned.
Operating models will need to cover a range of methods, including clustering to identify patterns in data, classification to support consistent decisions and ongoing monitoring to detect behavioural changes, it said. Policy controls, routing decisions and guardrails will also be needed to create defined intervention points and keep AI use within agreed boundaries.
Data protection rules are another constraint. Providers will need governance models that work within existing regulations while remaining flexible enough to adapt as official guidance evolves, according to Lumera.
This could become more relevant as the pensions industry awaits further guidance on the responsible adoption of AI from the Pensions Regulator later this year. In the meantime, trustees and providers must make decisions on governance, oversight and operating design without a single prescriptive framework covering all uses.
Sami Saadaoui, Head of AI Architecture and Operations at Lumera, set out the company’s position in remarks on the effect of the reforms.
“AI is set to become a critical enabler of the next phase of pension reform as the industry digests and begins to implement the Pension Schemes Act.
“Schemes and providers will need to leverage AI to deliver more personalised member outcomes, support automated processes at greater scale and improve the consistency of decision-making across increasingly complex datasets.
“However, the real challenge is not simply adopting AI, but deploying it within a robust governance and control framework. Pension providers and trustees will need clear accountability, strong human oversight and transparent decision-making processes to ensure AI is being used responsibly and in members’ best interests.
“The UK’s principles-based approach to AI regulation means firms cannot rely on prescriptive rulebooks alone. Instead, they will need to demonstrate that their operating models, controls and governance frameworks are sufficiently robust to manage risks around bias, data quality, explainability and consumer outcomes.
“The current swathe of reforms significantly increases the volume and complexity of data that needs to be processed and analysed. Firms need the scalable technology and human expertise to ensure that AI is unleashed to its full potential within defined guardrails.
“Those that manage this best will be best placed to capitalise on a new era of pension saving and access in the UK, delivering better outcomes and maintaining trust with members,” said Saadaoui.
Industry pressure
The comments reflect a wider challenge for financial services firms as regulators take a sector-led approach to AI oversight. In practice, pension providers may face scrutiny not only over whether they use AI effectively, but also over whether they can explain how decisions are made, how risks are managed and when humans step in.
For trustees, that could bring added responsibilities around supplier oversight and governance design, especially where third-party systems are used in administration, customer service or decision support. For providers, the issue is likely to extend across product design, member communications, data analysis and internal controls.
Lumera’s intervention points to a growing expectation that AI will become embedded in UK pension administration as reforms move ahead. Its central argument is that adoption alone will not be enough and that firms will be judged on whether their controls, accountability and human oversight are strong enough to protect members’ interests.
