Pension reforms to drive wider AI use, Lumera says

Lumera said the Pension Schemes Act will increase the use of artificial intelligence across the UK pensions sector by adding to providers’ data and reporting demands.

According to the company, reforms affecting defined contribution and defined benefit pensions will increase both the volume and complexity of information that schemes and administrators must manage. In turn, that is likely to drive wider use of AI, unified systems and updated operational processes.

Lumera highlighted the requirement for trustees to provide guided default retirement pathways for members of trust-based defined contribution pension schemes. Trustees will need to group members into categories suited to a particular default pathway, then revise those groupings as more information becomes available.

That process is likely to rely on handling large, changing data sets. Lumera said this type of task is well suited to AI because trustees will need to make repeated decisions based on the data they hold.

The wider reforms also point to heavier operational pressure across the market. Consolidation and new standardised Value for Money assessments are expected to create fresh demands for pension providers, particularly where data sits across different systems or in inconsistent formats.

Against that backdrop, Lumera said any broader use of AI will depend on trust, governance and compliance. Providers will need operating models and technology that can demonstrate compliance with current legal requirements and any further regulatory guidance, it said.

Operational shift

The comments reflect a wider debate in financial services over how automation should be used in regulated decision-making. In pensions, the issue is especially sensitive because providers and trustees deal with retirement outcomes, member communications and long-term savings records that may span decades.

Many schemes are already working through administration backlogs, legacy technology problems and pressure to improve data quality. The Pension Schemes Act reforms add another layer by raising expectations around standardised reporting and scheme oversight.

Lumera, which supplies technology to the life and pensions market in Europe, said AI is already being used to address some of the sector’s challenges. It added that the technology should be applied alongside human expertise, not instead of it.

Maurice Titley, commercial director for data and dashboards at Lumera, set out the company’s view on the direction of travel for the sector.

“As we enter a new era for the pensions sector in the UK, AI is set to be a critical driver of transformation in how providers achieve greater efficiencies and improve the member experience,” Titley said.

His comments place efficiency and member service at the centre of the case for wider AI adoption. They also suggest suppliers expect demand for data tools and automated processes to rise as schemes adapt to the new framework.

Titley also pointed to the compliance burden created by the legislation.

“Greater automation and use of AI will play a critical role in supporting the evolving requirements and regulations contained within the Pension Schemes Act that the industry must comply with. Innovative operating models, human oversight and robust governance will be at the centre of this drive, giving trustees and providers the confidence to capitalise on AI’s full potential,” he said.

The emphasis on human oversight is significant because pension trustees remain responsible for decisions affecting member outcomes. That means any use of AI in classification, reporting or administration will need to sit within clear governance structures and auditable processes.

Industry participants are also likely to face questions about fairness and explainability where automated systems influence how members are assigned to retirement pathways or how value assessments are prepared. Those issues have become more prominent as regulators examine the use of machine-led tools in consumer finance.

Lumera said the shift could extend beyond back-office processing and contribute to a more standardised pensions infrastructure. The company linked that potential to the long-term delivery of reform across administration, data management and scheme oversight.

“It creates an opportunity to improve administration, standards and outcomes right across the pensions sector, enhancing rather than replacing the expertise that defines the industry,” Titley said.

He added: “Investment in these technologies will be critical to extracting maximum value over the long term and achieving a market that is prudent, progressive and people-centric.”