Poor data quality and a lack of infrastructure are preventing UK pension schemes from making better use of technology, with the industry at risk of investing in new systems without addressing the underlying problems, PwC head of pensions data, Kristy Cotton, has warned.

Speaking at the Pensions UK Annual Conference, Cotton said the UK was “a million miles away” from Australia in its ability to use technology effectively, warning that a lack of reliable data was also preventing the automation of retirement quotations.

“We have to be really, really careful that we don't overlay technology on top of really bad foundations; that's not going to solve the problem in the UK,” she said.

“Data is just a blocker for us in the UK now, and as is the infrastructure. We can't even get automation of retirement quotations working properly because we don't have the systems and the data.”

Cotton said the defined benefit scheme market has faced “huge challenges” around data quality, accessibility and portability, making it difficult to transfer information.

However, she said the defined contribution market is in a “much better” position, with more established connections between pension records, HR systems and payroll, although there is still much more that can be done.

“One thing I would say is that we are, as an industry, aware of the challenge, and need to decide how to address the limitations that we have around the infrastructure and the technology,” she continued.

She pointed out that the Pensions Administration Standards Association was working with The Pensions Regulator on standardisation principles to improve data accessibility and allow information to flow between different systems.

However, Cotton warned: “That’s not an overnight solution, though, and we'll need the industry all together to work alongside that, agree the principles and adopt that. But this is a real challenge.”

Cotton also argued that consolidation could create the scale needed to invest in technology and deliver operational efficiencies, but said its success should be judged on the value it created rather than simply the reduction in the number of schemes.

“The main point I would say is we need to think about how we measure the success of consolidation here. We can't measure that just by we've got fewer schemes and they're bigger. It needs to be what value have we created and what member outcomes and capabilities have come from that,” she said.

She also said the industry needed to move away from existing operational models and towards what she described as “intelligent operations”, with providers delivering services that matched their capabilities and were supported by the right systems.

Cotton also called for the UK to learn from Australia's approach to pensions providing value, saying the forthcoming UK value for money framework needed to provide transparency around costs and measurement, ensure comparisons could be made between schemes and introduce meaningful consequences for those failing to deliver value.

She pointed to Australia's approach, under which schemes that fail to meet value requirements can be prevented from accepting new members, which she said, “really makes sure those requirements for value are met”.

“We need to have that,” Cotton said.

Her second priority was for the industry to embrace technology change.

“We can't keep fumbling along with technology that is not fit for purpose on bad foundations. We must have better technology and data coming quickly.”

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