Retirement savings gap growing at ‘worrying rate’

The retirement savings gap is growing at a ‘worrying rate,’ according to the UK fintech company, ABAKA, although the firm’s CEO suggested AI can help transform the level of engagement for savers.

ABAKA, which specialises in using AI-based technologies to deliver digital advice on retirement planning, has suggested AI is able to deliver accessible and affordable advice at scale, and that a shift towards the use of the technology is already underway.

The digital retirement solutions firm suggested AI-powered, cloud-based solutions, or chatbots, could see growing levels of popularity within the next few years, and indicated the sector will need to embrace the technology if the current rate of saving continues.

ABAKA CEO, Fahd Rachidy, said: “A lack of engagement in financial services has resulted in a retirement savings gap that is growing at a worrying rate. The World Economic Forum estimated that if savings remained at their current level, the world’s retirements savings gap will grow to $400tn by 2050.

“Retirement naturally seems a great distance away for most of a person’s working life, which in an age of instant gratification has resulted in a general apathy towards pensions.

“AI can transform the level of engagement, and help people save more to build a secure financial future and help reduce costs of business processes. It is exciting to see that this can also be applied to screening for sustainable investments, for example, and help reduce the carbon footprint of pensions.”

ABAKA has suggested that AI chatbots make it easier to find the answers that savers might need in helping to formulate retirement plans.

Though with the current forecast highlighting the retirement savings gap is set to rapidly grow, the retirement solutions specialist indicated both pension providers and younger generations could benefit from intelligent personalised nudges through AI technology, to dramatically improve customer engagement in retirement planning.

ABAKA indicated for the older generation nearing the retirement age now, their engagement with technology is not a factor – Rachidy describing the idea that older generations do not use technology as a ‘myth.’

“Ask any 25-year-old how much they’ve saved towards their pension, how many pension pots they have or even which schemes they are with, and you will probably get the same answer; they won’t know,” Rachidy added.

“The reality is younger people in general are not thinking that far ahead, and accessing that information is not always easy. Through AI, providers could start to nudge and intelligently engage their customers at a much younger age through a communications channel they are familiar with.

“This would have tangible benefits for both sides – consumers would be better prepared for later life, and pension providers would have a long-term customer base more engaged with their savings.”

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