Blockchain technology 'could transform pensions administration': KPMG
A universal and decentralised ‘blockchain’ database would be a more reliable and easier alternative to current administration systems, according to KPMG.
In a white paper, the consultant said that the technology behind the digital currency Bitcoin could help create a “true financial passport”.
KPMG has developed a blockchain concept in co-operation with Dutch IT firm Cegeka, using ‘distributed ledger’ technology to automate administration tasks.
It explained that the database the two firms had created – aimed at providing an overall view of somebody’s pensions income and assets – could be checked or adjusted by anybody with the correct access details.
Data could be stored at different locations, for example at current pension providers. As the data continuously synchronises and is encrypted, the storage is safe and doesn’t depend on one single player, according to KPMG.
Dennis de Vries, head of the consultant’s digital ledger services, said employers could automatically link their salary administration to the network.
Pension funds and insurers could build a “smart contract” into the sponsor’s system, which would automatically calculate and upload pensions accrual. All adjustments would carry a time stamp, providing full insight into past changes.
Currently, several providers are investing millions in updating their administration systems. A data transfer to another provider is often very complicated, as every system stores information in a different way.
In contrast, the blockchain concept would be universal and not owned by an single player, KPMG argued.
De Vries said: “This would enable the pensions sector to focus on its core tasks again, such as asset management and designing pension arrangements.”
He indicated that the database could be extended with third-pillar products as well as information from banks, which must share their payment data with an increased number of parties following the EU’s Revised Payment Service Directive.
De Vries said this would open the way to a universal financial passport, comprising real-time information rather than the relatively old data held in the Netherlands’ national pensions register.
According to Pieter Kiveron, KPMG’s head of pension advice, the white paper was meant as an invitation to the pensions sector to contemplate who was best placed to set up and manage such a project.
De Vries suggested that a foundation could be set up to manage and further develop the universal administration blockchain.
Blockchain was first applied by the developers of Bitcoin in 2009, with the decentralised database registering the balance of all holders of the digital currency.