Stephen Ruse of Aon Hewitt looks at the 10 biggest challenges facing administrators
Pensions administration never fails to deliver a few challenges.
Whether you are trying to respond to the need for GMP reconciliations, keeping up with new pensions legislation or adapting to new derisking opportunities - there is always something to keep pensions managers and administrators on their toes.
We have identified the top 10 challenges - by looking at issues raised in our most recent Pensions Administration Survey - and examine what schemes can do to address them.
The biggest administration decisions you face tend to fall into three categories:
- Those relating to external legislation or demands
- Those where scheme administration can be used to support scheme management and innovation
- Those that relate to administration outsourcing
Here we look at each in turn.
1. The need to carry out GMP reconciliations.
In our last administration survey, GMP reconciliations were seen as the biggest issue by some margin. 22% of schemes surveyed said that GMP reconciliations were their priority. With GMPs also a major focus for HMRC, it should be an area of focus for you. Cleaning up your data is a vital first step.
2. Responding to pensions freedom and choice
Help your members to make the most of the new freedom and choice opportunities. Your communications need to be up to scratch - and your scheme data has to be high enough quality to support any comms initiatives you undertake.
3. New Standards of Recommended Practice (SORP) for pension scheme accounting
These standards, brought in last year, increase the complexity of scheme accounts. Make sure you understand their impact - and check with your administrator to ensure they have the ability to deal with the requirements.
4. Derisking opportunities
Increasingly, DB schemes are looking to derisk - but good admin support is vital. A lack of accurate data, poor project management capability and poor governance can thwart your ability to take the opportunities available. Does your administrator have the skills and capacity to support your derisking projects?
5. Data quality
Scheme data underpins every communication or member project you carry out. As we have seen, it is particularly important for a GMP reconciliation or derisking exercise. Carry out a data cleanse if you have not done one within the last 12 months.
6. Getting communications right
A segmented approach to communications is essential if you want to meet member expectations. Audit your current approach to identify areas for improvement. Consider a service centre approach, particularly if your scheme is undergoing significant change.
Third party admin decisions
7. Keeping your expectations and budget in line
Cost was the main driver for outsourcing administration in our last survey. But be clear on what you are getting. Can a potential provider really deliver everything they are promising for the price quoted? It can be worth digging into the details of a proposal and getting a clear breakdown of costs to ensure that everything will be delivered as you expect.
8. Maintaining service quality
Member service is one of the most important considerations when you outsource. Service quality and price are usually related — yet despite 46% of our 2015 survey respondents recognising this, 40% were not prepared to pay more for a better-quality service. Your decisions need to recognise the link between quality and price.
9. Getting your delivery model right
Double-check your service delivery model. Is it right for you? If it is over-engineered or more bespoke than you need, revisit it to see if you could achieve better value. Be open to options like standardised service delivery - they can have a positive impact on cost.
10. Get the right offering from your provider
Many administration providers can deliver far more than just scheme administration - and 45% of our survey respondents wanted a wider, more integrated offering. Ask what your current provider can deliver, and look at alternatives if they cannot give you what you need.
Stephen Ruse is UK outsourcing commercial director, Aon Hewitt