Trustees and pension providers will need robust governance frameworks and strong human oversight as artificial intelligence (AI) becomes increasingly central to delivering the government's pensions reform agenda, according to Lumera.

The insurtech firm argued that the Pension Schemes Act, the recently launched targeted support regime and potential future reforms following the Pensions Commission's final recommendations will significantly increase the volume and complexity of pension data that schemes and providers need to manage.

Lumera suggested that AI will become a critical tool for analysing data, supporting automated decision-making, but warned that firms must ensure appropriate governance and controls are in place.

It highlighted changes such as default retirement pathways, value for money (VFM) assessments and small pots consolidation as areas likely to increase demand for more sophisticated data analysis, matching capabilities and benchmarking.

However, Lumera cautioned that the UK's principles-based approach to AI regulation means trustees and providers cannot rely on prescriptive rules and will instead need to establish their own governance and operating frameworks.

According to the firm, these frameworks should include clear accountability, strong controls and defined human oversight, including the use of "humans in the loop" to review and challenge AI-generated outputs where appropriate.

Lumera also stressed that providers will need to ensure their AI operating models remain compliant with data protection requirements while retaining the flexibility to adapt as regulatory expectations evolve.

The firm pointed to The Pensions Regulator's (TPR) planned guidance on the responsible adoption of AI, expected later this year, as an important development for the industry.

Lumera argued that governance frameworks should cover a range of AI techniques, including clustering to identify patterns in data, classification to support consistent decision-making and ongoing monitoring to identify behavioural changes and inform appropriate interventions.

Commenting, Lumera head of AI architecture and operations, Sami Saadaoui, said: "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, Saadaoui argued that successful implementation would depend on firms establishing appropriate governance arrangements.

"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."

Saadaoui also warned that firms will need to demonstrate they can manage risks related to bias, data quality, explainability, and consumer outcomes.

"The UK's principles-based approach to AI regulation means firms cannot rely on prescriptive rulebooks alone," he noted.

"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."

Saadaoui concluded that organisations able to combine scalable technology with effective governance would be best positioned to benefit from future pensions reforms while maintaining member trust.

"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."

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