Pension fund member communication sometimes feels like it begins in the last century.
As a deferred DB pension scheme member interaction with my fund is largely in writing (from them, yearly) and there is no online facility. My DC scheme’s online portal is less than perfect. Given that pension savings and entitlements represent the largest financial asset for many, this not untypical state of affairs seems unsatisfactory.
Most IPE readers will have heard about blockchain – a distributed, or public, ledger. Aside from cryptocurrency assets such as Bitcoin that are created as part of the blockchain process, distributed ledger could represent a new future standard for transaction verification. Each segment of the blockchain contains a unique reference (a hash) verifying its precise sequence in the chain, so should be impossible to counterfeit.
According to numerous commentators, we could be on the cusp of widespread recognition of the benefits of the blockchain – namely instant, worldwide verification of transactions without intermediaries.
One of the advantages of blockchain is that potentially millions of participants are incentivised to create further blockchain architecture through the reward of a cryptocurrency unit.
This perpetuates trust in the architecture. Some even think we could all lend the spare processing capacity of our connected electronic devices to mine Bitcoin or other cryptocurrency units to maintain blockchain as a public good.
A wave of technological innovation helped the rise of the internet, which transformed the way we interact and transact with the world. This unprecedented increase in connectivity has also given rise to opportunities for thieves, hackers and other ne’er do wells.
Many trusted financial services brands use outdated software platforms that are sometimes decades old and vulnerable to hacks and breaches. The recent international outage of the Visa network nearly left me stranded in a Spanish taxi.
“The rise of blockchain architecture coincides with a period of falling trust in institutions”
The rise of blockchain architecture coincides with a period of falling trust in institutions. As trust in governments, blue-chip corporations and Silicon Valley tech companies ebbs, confidence in decentralised blockchain architecture could well increase.
What does all this have to do with pensions? Quite a lot, actually, particularly in the area of secure record keeping. If declining trust in traditional financial institutions and intermediaries leads to an increase in trust in blockchain architecture, billions of consumers worldwide may migrate their assets and transactions to distributed ledger-enabled platforms. Why should they then not demand the same of their pension fund?
This is why those with a stake in the future of pensions really need to think about how public trust in pensions saving is to be perpetuated in a world where trust finds a new anchor in distributed ledger.
Liam Kennedy, Editor