Pension schemes and providers must know where AI is being used and need clear governance in place, workplace pension provider Penfold has urged.
The firm said AI has the potential to make pensions better but the industry needs to adopt it responsibly.
A recent Society of Pension Professionals survey found that 100% of respondents reported using AI, up from 87% in 2025, illustrating how quickly adoption is increasing across the sector.
The Pensions Regulator’s recently published AI plan set out its initial expectations for how pension schemes should manage the use of AI, including appropriate governance, transparency, cybersecurity and safeguards for members.
Chris Eastwood, CEO of Penfold, said: “AI has enormous potential to improve how pension schemes operate and communicate with members. But realising that potential requires providers to stay in control: understanding where AI is being used, how its outputs are being assessed, and who is accountable when something goes wrong.”
He pointed out that AI isn’t always introduced through a standalone system developed by the scheme itself. Increasingly, it can be embedded within third-party administration, consultancy and communications platforms, making it harder to understand exactly where and how AI is being used.
Mr Eastwood said pension schemes and providers need to be asking the core questions. “Where is AI being used across their network, what member data is being accessed, what controls are in place, and how are AI-generated outputs being assessed? Outsourcing the use of AI does not remove an organisation’s responsibility for appropriate governance and oversight.”
He said AI can support fraud detection and operational processes across schemes, but its growing use also brings new risks, including AI-generated impersonation and fraud, as well as the inappropriate use of member data.
The firm said schemes should start with the following governance response:
• Identify where AI is being used across the scheme and by service providers.
• Put an accountability framework in place to define who is responsible for approving and challenging AI.
• Assess what member and scheme data AI systems can access, process or retain.
• Conduct an audit of AI suppliers by asking administrators and technology providers for their AI governance and testing processes.
• Identify which AI-generated outputs could materially affect members and establish where human review or intervention is required.
• Set up consistent monitoring of AI usage.
Mr Eastwood said: “Schemes shouldn’t avoid AI - the opportunity is significant. But adoption needs to go hand in hand with proper oversight.
“Technology should make pensions simpler and better for people, and innovation only works if members and employers can trust the systems behind it. Getting AI governance right now will give the industry the confidence to make greater use of these technologies in future.”