Admin Panel (April 2007) - Loud and clear

Chairman
Peter Sparshott
Director
PricewaterhouseCoopers
Sparshott has worked for Pricewaterhouse
Coopers for the past eight years. He is a director within the firm’s pensions practice and has advised many leading UK pension schemes on all aspects of their pension fund operation, including: scheme design and implementation; system selection and implementation; outsourcing; operational and impact assessment reviews resulting from legislative and corporate changes.

1. We are ap-proaching the first full year of “post A-Day” admini-stration. What do you believe have been the most significant issues faced during this period and how are these/have these been overcome?

2. Given the “bad press” relating to pensions over the last few years, are people still interested in a career in pensions administration and how are you finding the current market for recruiting pensions administration staff?

3. We would probably all agree that to a large degree the success of defined contributions relates to member engagement and education. We also know it’s an industry challenge to engage the public to save adequately for their retirement, particularly when this must be balanced with other calls on people’s income. What are your views in terms of how we, in the industry, are helping to tackle this difficult issue – are we doing enough and, if not what do you see as the barriers to doing more?

4. Many clients I have spoken to in the past year have expressed concerns when their administration provider has proposed moving some of their services offshore. What are your views on offshoring pensions administration and explain your reasoning?


Mike Reid
Director of pensions
Higham Dunnet Shaw
Mike Reid is director of Pensions at Higham Dunnett Shaw, a leading provider of consultancy and outsourced administration services for life assurance companies, pension schemes and pension trustees. HDS has been serving the needs of the pensions industry since 1986. It delivers a range of innovative, high-quality solutions to support the administration of corporate pension schemes, with proven procedures that can substantially improve efficiency.

1. The initial focus within the industry has been on achieving compliance with the new regime and I believe we can confidently assert this was a success. The next phase will be a much bigger challenge as schemes start to consider how they can implement significant changes to scheme designs to offer members more flexibility. Such flexibility will, without doubt, significantly compli-cate administration processes and systems. I believe this will be a major challenge for many administrators.

2. The main recruitment challenge is not related to the bad press but rather how pension administration is perceived by potential employees. Histori-cally, given the nature of defined benefut schemes, people have viewed this job as involving lots of complex calculations, performed in a real back-office environment. While this remains true to an extent, increasingly pension admin-istration is about having to deal directly with scheme members, which means cus-tomer service skills are essential. In addition, the growth of DC is introducing a need for people with the ability to process transactions quickly and accurately; to operate with a mindset that the working day does not end until everything is processed and reconciled.

3. The recent The Pensions Regulator consultation paper on risks within DC schemes highlights our failure as an industry to tackle the issue of member engagement and education. This is a massive challenge and one that needs to be addressed through the implementation of different solutions than those used to date. Providing a member experience that makes a difference requires member interaction to be personalised to each individual; taking into account their current level of understanding, their learning preferences and how their thinking about pensions sits alongside their wider needs for financial products and services. The key barrier to overcome is to accept that a one-size-fits-all solution focused on pensions is not going to work. Only then can we move toward real member engagement.

4. A key consideration is which activities can be offshored. I think we can safely conclude the British public is not happy to deal with overseas-based contact centres and therefore the only activity that could reasonably be considered for offshore is back-office processing.
Another consideration is what the driver is for wanting to offshore elements of the administration process – improved quality or reduced cost? I believe in reality the driver is always cost, although quality may improve as a secondary benefit. While there is a short-term cost advantage, I have concerns over the medium to long term this will be eroded as wage inflation in the offshore environments will be significant and may result in significant retention problems.
The costs involved in ensuring a robust control framework exists to oversee the offshore activity should also not be underestimated. Several providers have recently implemented off-shore solutions and are promoting the benefits. However, I think it is far too early to judge these and we will need to wait to see what happens after three or so years of operation. Without this type of evidence I believe offshoring pension administration is currently too risky an option.


Brian Critchell
Xafinity Paymaster
Senior account manager
Critchell is head of account management for Paymaster’s statutory and public service schemes and responsible for the company’s technical development team. He has 40 years’ experience in pensions, half with a major global consulting firm. He is a fellow and council member of the PMI, a regular speaker and contributor on behalf of both the PMI and Paymaster.

1. Definitely the new con-cept of benefit crystal-lisation events and how these are to be dealt with. The provisions are extensive, complex and the detail devilish. The heavy investment needed has been as much in people as in process.
We had to understand the issues and be in a position to explain them to (largely) perplexed members and clients. To deal with this effectively we increased resources, with special project teams to assist clients through the provisions and provide training for client facing staff to ensure they are fully conversant in the issues.
The degree of uncertainty about the detail has been frustrating. Ironically, HMRC has been understanding and cooperative for the most part. There has been an unprecedented level of cooperation between pension service providers and HMRC.

2. From a technical perspective these are testing and stimulating times for service delivery providers. Innovative solutions will be adopted by clients committed to the best of workplace benefits in their search for employee talent. A wide range of skills is called for and the challenge for us is to offer a breadth and depth of opportunity for those with transferable skills. The best project manager I have ever worked with was a qualified engineer!

3. I agree the success of DC hinges on education and many administration firms like ours have invested a great deal of time and effort in ensuring information requested by members about the benefits we administer is clear, relevant and useful to their circumstances. It is part of our core offering.
It is a fact that it is difficult to communicate personal finance, and pensions in particular, in a “sexy” way that encourages members to take a keener interest in their futures.
While we can devise the means of interaction in the workplace, employers need to have recognised that there are problems with the way that their members are engaging with what is on offer. The internet has a role, but not exclusively.
Administrators understand how the arrangements we administer work and why, so can offer a suite of options, including member work-shops, training for staff and HR employees and open surgeries. If pensions can be at least demystified, employees might just understand that if they engage with their pension they could get a lot more out of it.
If the employer is not willing to pay for this service, however, then it is nearly impossible to provide. The government is allocating significant sums to improve financial literacy amongst the general public, including in the workplace, so financial support and incentives may be there for concerned employers.

4. The outsourcing market is still growing. In financial processing, unlike IT or other popular outsourcing fields, it can be argued the ability to remain “onshore” is an advantage in terms of security and control.
For some processes, however, unit cost may drive location. What should matter to clients is that their provider brings to them the right blend of people, process and platform, to drive the necessary economies of scale and skill demanded in a changing environment.


Richard Hardy
Capita Hartshead
Pensions operation director
Richard has over 22 years’ experience in pensions and is currently responsible for leading the delivery of pensions administration to Capita Hartshead’s clients serviced from its Sheffield and Leeds operations centres. Managing over 450 clients, and handling over 3.2 million lives, Capita Hartshead is the largest specialist pensions administration organisation in the UK and has provided bespoke, innovative solutions to the industry for over 30 years.

1. For administrators, A-Day represented a great challenge in terms of revising processes, databases, calculations, documentation and training. Our fundamental objective was to ensure our clients’ schemes operated compli-antly in the post A-Day environment, taking account of new legislation and scheme rule changes made by clients taking advantage of the new-found flexibility.
A huge team effort has been made to ensure we have coped with the tech-nical changes of simpli-fication while maintaining a high standard of service for our clients and members. We are now in a position where the main aspects have been dealt with and outstanding issues such as the imprac-ticality of the BCE3 and trivial commutation rules, or con-cerns over the unauthorised payments rules, can be tackled.

2. Pensions “bad press” has no real influence on interest in careers in pensions administration. While we are always on the look out for good-quality experienced administrators, we take great pride in the success we have achieved in growing our own talent.
We are currently in the seventh year of our graduate recruitment programme – our fast-track strategy to bring high-calibre individuals into pensions administration.
We are also recruiting more trainees than ever before and providing them with excellent training.

3. The government’s planned national system of personal accounts and the shift towards auto-enrolment of employees into their employer’s existing occupational schemes will do more in terms of take-up of DC schemes than the industry alone ever could.
That said, the industry must work relentlessly to find ways to encourage active participation in contribution and investment decisions – a must for effective retirement planning. This will be a difficult task in a society with an “I want it now” culture. While there are beacons of exemplary practice, these are not widespread and most well-meaning attempts have had very limited success so far.
What is likely to change in favour of more active member involvement is the gradual growth of funds under management to a point where DC funds represent a significant financial asset too big to ignore. Perhaps when funds reach a certain level, say someone’s annual salary, members will start to take notice and increased interest in retirement provision will ensue.

4. It is only right for clients to express concerns over such a move. Any move to outsource to a third-party administrator already involves clients in weighing up areas such as quality, service, risk and value for money. Offshoring is going one stage further and means previous decisions need to be re-evaluated in light of other considerations.
Important drivers for offshoring may include cost reduction or increasing the capacity for specialist resources that are in short supply in the UK, which should not be ignored. Our view is therefore that quality administration providers will need to have offshore capacity for aspects of administration, but this should be part of an overall offering.
Ultimately, offshoring should be at the client’s option and not imposed by the provider.


Malcolm Reynolds
Commercial Director
JLT Benefit Solutions Ltd
Reynold’s role is as national director of the benefits administration practice that provides advice to clients on operational administration effectiveness. Reynolds is a member of the JLT executive and has over 15 years’ experience in the pensions industry. He was previously a director at PricewaterhouseCoopers, where he spent 11 years and was responsible for the pensions management consultancy services. Reynolds was also a director at Profund Systems.

1. The most significant issues facing admini-strators during the past year have been:
• Delays and clarification in the finer detail of the Pensions Act and Finance Act 2004 which in turn has led to;
• Delays in clients making decisions relating to how trustees and sponsoring employers will adopt specific aspects of the acts including the re-design of scheme benefit structures, which has led to an impact on;
• The timescales and corresponding operational effectiveness in ensuring these measures are implemented in a systematic, timely and effective way.
These issues have now been overcome.

2. Through our continual recruitment programme, we are finding that during the appropriate times of the year, there are large numbers of post graduates that are looking for opportunities into financial services organisations and are choosing pensions administration as an initial career choice.
It helps to have a pensions academy that can support the career development of these people which needs to be balanced with those administrators that do not want the same career progression paths. For other times of the year, there continues to be the usual degree of turnover with regard to pensions administration staff moving from one organisation to another.

3. To ensure the public contribute adequately to secure an appropriate lifestyle in retirement requires either a better degree of education relating to the investments that need to be made or, where the public do not have adequate invest-ment/employee benefit offerings supported by spon-soring employers, then some element of compulsion would need to be considered.
The whole concept of education has been relevant and talked about for some time but progress on supporting initiative is slow. Education must start at the grass roots level within schools so that a country culture is developed of understanding and investing in our futures. As an industry, we could do more.

4. Offshoring opportunities are constantly being reviewed and explored by many third-party pensions administrators and financial institutions due to the potential high calibre of staff available and cost savings that could be enjoyed.
However, JLT's position is that any offshoring should only take place where there is a benefit of improvement in service delivery and should not include any aspect of customer facing services.


Nick Courtney
MNPA
Head of client management
Courtney is responsible for the management of client relationships through MNPA’s client management team. Before joining MNPA in January 2007, Courtney was UK pensions and benefits manager for a major communi-cations organisation for over five years. Prior to that, he worked for a major employee benefits consultancy as an operational effectiveness consultant for 13 years. Consequently, Courtney has wide experience of administration.

1. The most significant issue post A-Day has been maintaining excellent customer care.
Becoming familiar with administering schemes in the post simplification environment and ensuring compliance with the new regime resulted in administrators having less time to spend on making members feel valued.
We addressed this by launching a major customer care initiative shortly after A-Day, focusing on interaction with members and reassuring administrators that taking time to ensure customer satisfaction was as important as speed of response.
This approach was adopted following feedback from our participation in the RSPA pilot survey which showed that, provided the member received a response within an acceptable time-scale, it was more important they were treated in a helpful manner by people who “spoke their language”.

2. Increased focus on pensions and the ever-changing nature of our industry has made recruit-ment and retention of staff easier as the work involved is more challenging. Typically, people do not consciously choose a career in pensions administration and most enter it by default. However, once involved they discover it can be an energising environ-ment with good prospects. The recruitment market is currently very buoyant for candidates with high demand from employers.

3. Education regarding the importance of saving for retirement needs to start much younger – ideally in schools and colleges. That is a longer term solution and there are steps pension administrators can take now to support member education, starting with the basics – ensuring commu-nications are clear and easy to understand and checking this is the case through member surveys.
We should take advantage of the flexibility different media provides us with, although we remain con-strained in some areas by regulatory requirements which still insist some documents e.g. benefits statements for DC members, are issued in paper form.
The proposed “Reasonable Periods” code of practice included proposals allowing providers to communicate statutory information electronically but this has subsequently been deferred. Evidence shows sometimes information is better communicated electronically. This is particularly true where immediate access to information is important such as helping DC members actively manage investments.

4. We considered the possibility of offshoring some work we carry out on behalf of clients but decided against this.
As a specialist provider of services to UK schemes, we believe our objectives can be best met through skilled staff who fully understand UK business practices and social culture. In addition, UK pension legislation is, as we know, very complex and queries received from members are many and varied and often require scheme-specific knowledge to answer them.
We need to combine this with the fact we are often dealing with members as they experience life-changing events. It is hard to respond to these types of queries adopting a “call centre” approach. It is important we interact well with members, pensioners and beneficiaries – an area where MNPA prides itself on its excellence.