KGC Associates' administration survey revealed the industry thinks administration is not taken seriously. Holly Roach looks at the survey findings.
The pensions industry believes administration must be taken more seriously, according to KGC Associates' 10th administration survey.
The firm's survey - which ran throughout March - asked 17 administrators, a series of questions including ‘if you could change one thing in administration, what would it be and why?' The clear consensus was that administration should be taken more seriously in the industry.
The administrators were asked to produce costs of services broken down into five categories: administration; pensioner costs; treasury and accounts; implementation fees; and overall one-year costs for a range of scheme sizes covering between 200 and 20,000 members.
It also compared the percentage of ‘core offerings' provided by administrators for a standard fixed fee.
This year's survey saw a decrease in the number of administration firms offering 100% of the core tasks stated. This year just two firms provided the full suite, while last year's survey identified eight firms with capabilities across all core tasks.
KGC research analyst Hayley Mudge says the core services were reviewed, and while there were 46 last year and 45 this year, the firm "didn't think dropping one service off would make a huge difference".
Mudge says a potential reason for a limited number of firms offering all the core tasks is "perhaps prices have been driven down so far that the only way to remain profitable is to remove tasks and charge more for them".
One survey respondent said they would change "the level of importance/significance that administration gets from clients and trustees".
Mudge agrees administration should be more important, noting it "should be at the top of the agenda for trustees and service providers".
She notes, however, that attitudes towards administration may be changing, explaining: "In the past, investments and actuarial issues seem to have been the most discussed things at trustee meetings. Administration is just there, it gets done, and then people just swept it under the carpet, whereas now trustees are starting to look at data and their administrator to make sure the service they are getting is what they want."
Pensions Administration Standards Association board director Girish Menezes notes there are many areas of scheme management that administration touches on.
"Pension administration sits at the core of every scheme and impacts accuracy of calculations, member satisfaction and reliability of valuations," he says.
"It is important the industry invests in and drives up the standards of administration."
A pensions director involved in the survey said: "Everyone needs to recognise how important administration is and be prepared to pay for a well-staffed organisation which is not constantly looking to make short cuts and has ‘thinking' time to consider the quality of the responses and service offered."
The industry has seen a number of changes over the past 10 years, including market consolidation, various ministers, advancements in technology, and increased engagement from members.
When asked what they thought would have the biggest impact on pensions over the next 12 to 18 months, most respondents (53%) opted for GMP equalisation.
One respondent said they were "very worried" about pension administration resources, "especially given the GMP reconciliation projects to finish, GMP rectification, and GMP equalisation to come".
Some 29% of administrators said Brexit would have the largest impact. Inr comparison, when the same question was posed to pension managers and trustees in the final section of the survey to provide a wider industry view, 38% thought Brexit would have the biggest impact.
Just 12% thought data quality and cyber security would have the biggest impact - a massive drop from 56% the year prior.
One respondent said: "Engagement with members remains an issue for trustees. The vast majority of members show little interest in their pension until they are close to retirement and this is regardless of the website options that may be available to them."
Just 6% said further consolidation of the market would impact the industry the greatest, while no respondents thought the pensions dashboard would have the biggest impact in this period.
Many respondents noted that a key issue with pensions administration is the increasingly crowded market along with fewer providers being deemed credible to take on the work.
"There are still a lot of pensions administration tenders out there, and a number of large projects to come. With less providers there is a mounting problem," said one survey participant.
One said: "We are seeing a steady flow of new clients - we are being careful to manage our business responsibly during this busy period."
However, the shrinking market is viewed positively by some, with one survey participant saying: "Administration is very much core to strategy and the fact that the pension scheme market believes we are committed to pensions administration puts us in a strong position."
Another suggested, in a shrinking provider market, "those providers that have the range of services to meet different client requirements will be successful".
A professional trustee said a change they would make to ensure administration is taken more seriously is the name of it, "because ‘administration' implies paper-pushing, and pension administrators are highly trained, highly-skilled individuals and they should be recognised as such".
Pensions Management Institute co-vice chairwoman Lorraine Harper says administration is the "backbone" of pensions.
"Pension scheme administrators are skilled individuals with a deep understanding of complex benefit structures, associated calculations, a wide range of legislative and scheme specific terms and conditions and negotiating difficult data regulation and security," she continues.
An issue which respondents were relatively negative in their views about was the pensions dashboard. None of this year's respondents believed the dashboard will be market ready in one year's time.
However, they were not in agreement in their views on when it will be ready, with 24% saying within two years, 24% saying three years, and a further 24% saying five or more years. Some 12% believed four years is when it will launch, and the remaining participants said another time.
For some positivity, 73% of administrators said their clients have been fairly engaged over the past 12 months with their pension. A fifth said their members were very engaged while just 7% said their clients were not engaged at all.
Mudge concluded that, while "the industry is trying to be more active in encouraging people to take [administration] more seriously", we are not there yet and more needs to be done to ensure administration is viewed with the importance it requires.
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