These fall into various categories. Some tools are designed to help employees better understand their own attitudes to investment and help them reach decisions about the investments in their pension. These would include: risk-profi ling tools to help members understand their attitude to risk; portfolio modelling tools to help explore the type of assets held in a pension fund and whether these align with the employee’s attitude to risk; and asset allocation tools, which would help a member identify investments that match their risk profile.
Other tools are designed to help the scheme member better understand costs and benefits. For example, a pension planning tool will estimate, based on industry assumptions, how much is likely to be generated by a given contribution over the period up to retirement.
Some tools allow users to input values of other pension schemes they may hold. Salary sacrifice or exchange calculators show the additional benefit that can be achieved by giving up a portion of salary or a bonus in lieu of pension, which can reduce national insurance costs.
Other tools will enable a pension scheme member to target a particular level of income in retirement, or estimate the amount of tax-free cash they might be able to take in return for a reduced pension on retirement.
There is increasing evidence to suggest that effective use of such tools can help staff take more control over their finances and generally improve their financial wellbeing.
Ian McKenna is director at the Finance and Technology Research Centre (F&TRC)