PP Administration Survey: The results
This year’s survey reveals what schemes are looking for in administration systems and third-party administrators and highlights the key providers.
This year's survey reveals what schemes are looking for in administration systems and third-party administrators and highlights the key providers.
- There were 192 respondents
- Around 70% of schemes outsourced administration and 30% used in-house arrangements
This survey gathered data from respondents in both the public and private sector; and across a range of different scheme types.
The majority of respondents are responsible for defined benefit (DB ) schemes, with the next greatest proportion managing defined contribution (DC) schemes. Other scheme types such as hybrid and career average schemes make up the remainder of the schemes.
Some 64% of responses came from DB schemes and 19% came from DC schemes - a three percentage point increase on the proportion of DC respondents in the 2015 survey.
Over the past three years the split between pension schemes holding their administration in-house versus outsourced has shown little change, with a roughly 2:1 split in favour of outsourced solutions. In this year's survey 69% of respondents outsourced administration for their main scheme while 31% kept it in-house.
We received responses across a whole spectrum of schemes in terms of assets under management. Almost one-third (27%) of those who responded to this year's survey ran assets of more than £1bn; a further 12% of schemes were worth somewhere between £500m and £1bn; and 23% of schemes were worth between £100m and £500m.
Smaller schemes also responded to the survey with 16% of respondents having assets of less than £25m. A further 12% of responses came from schemes worth between £25m-50m and 10% came from schemes worth between £50m-100m.
In-house schemes
According to our research just under one-third (31%) of schemes choose to keep their scheme administration in-house. Two-thirds of these (66%) were DB schemes while over half of all represented funds (52%) were valued at £500m and above, and 37% valued at over £1bn.
So what are the reasons behind the decision to keep scheme administration in-house? There are many it would seem. Quality of service continues to be the most common driver by some margin, motivating nearly seven-tenths (69%) of the sample. Some 67% cite level of expertise and cost control as a reason and 60% say flexibility is a key motivator.
However, while many schemes wish to keep their administration in-house they often need to outsource some aspects of it to ensure it works as well as it should. Some 19% of schemes who have in-house administration have chosen to outsource some elements of it. Popular areas include actuarial support, AVCs, DC arrangements and communication.
Assessing how well administration systems work is important and the results of this year's survey shows there are many ways schemes are employing to do this. Almost two-thirds (64%) of schemes managed in-house said they assessed the efficacy of their administration through an annual review.
The next most popular method was end-to-end process items - 48% of scheme participants chose this option. Complaint levels were also a popular way to judge performance with 46% of scheme participants choosing this option, while 37% of those who answered the question said they gauged the efficacy of their administration by the number of compliments they received.
Some 15% of survey participants said they had no process in place to measure the efficacy of their administration system.
Rating software providers
We then went on to ask those who kept scheme administration largely in-house to let us know how important certain features are when it comes to evaluating administration systems. Seven attributes were chosen, with participants asked to rate them on a scale of one to five, with one being not important at all and five being essential. An average of these scores was then produced to put together a ranking of the most important features of administration systems.
Perhaps not surprisingly, data accuracy remained the most important feature when it came to assessing administration systems, scoring an average of 4.90 out of five. This was followed by reliability, which scored 4.72 and good customer service with 4.45. Technical support (4.48) and value for money (4.33) also scored highly.
We also asked survey participants which software providers they rated most highly. Equiniti's Compendia ranked most highly with an overall satisfaction score of 3.88 followed by AquilaHeywood's Altair system (3.80) and Civica's Universal Pensions Management (UPM) with a score of 3.66.
Outsourced administration
We then moved on to those schemes that chose to mainly outsource their scheme administration. The majority of such outsourced schemes run defined benefit schemes (63%). According to the survey, 45% of outsourced schemes are valued at £250m and over.
We went on to ask their reasons for outsourcing their administration. Two or three key reasons came up, with technical expertise being most popular (76%) followed by insufficient internal resource (72%). Providing a better service to members was also important and cited by 56% of respondents.
Of those respondents whose schemes outsource their pension administration, around a third (42%) continue to administer some part of it in-house. Member communications was the most popular element to keep in-house and was cited by 60% of those who answered the question. Other important elements to keep in-house include finance (43%), accounting (36%) and legal (20%).
Survey participants were then asked to rate important factors in assessing the efficacy of third-party administrator systems. Again, as with in-house systems, participants were asked to rate a number of important factors on a scale of one to five, with one being not at all important and five being essential. Data accuracy continued to be seen as the most important factor scoring an average of 4.88 out of five. This was followed by reliability (4.69), good customer service (4.52) and technical support (4.28).
These weightings were then used to produce a rank list of all third-party administrators analysed in the survey.
We then went on to ask survey participants which third-party administrators (TPAs) they currently use or had experience of working with. Capita Employee Benefits led responses, being used currently by 20 respondents and having been used by 33 respondents. Other TPAs with high response rates include Mercer (20 and 44 respectively); Towers Watson (16 and 34); and Punter Southall (14 and 20).
In terms of satisfaction scores among TPAs, Punter Southall came out top with an overall score of 4.09. They were closely followed by Barnett Waddingham (3.98) and Hymans Robertson (3.65).
Cost of administration
Administration costs have been a hot topic in recent years. We asked our survey participants to tell us whether they felt their administration costs had risen or fallen over the past 12 months. Well over four in ten (45%) said their administration costs had risen over the past year while just 11% said they had decreased. However, costs remained unchanged for 44% of those who answered the question.
New legislation was cited by several participants when asked why their administration costs have increased over the past 12 months. Other reasons cited by respondents included additional fees for items not included in standard fees, annual increases and increased member activity.
Those who had seen their administration costs remain the same or even decreased often said it was because they had either opted for a fixed fee agreement; had either negotiated a reduction in fees from their current provider; or had switched to a new TPA.
Finally we asked survey participants to tell us what factors would have the biggest impact on the pensions industry over the coming five years. Perhaps not surprisingly the key factors were overwhelmingly linked to legislation - and both the pension flexibilities and future changes to tax relief were popular with respondents.
Whether schemes choose to keep their administration in-house or outsource it to a third party, it is clear there will be busy times ahead. Complying with pension flexibilities, the annual allowance taper and a raft of other government legislation will take up a huge amount of time and resource, and administration providers and systems will need to be robust if they are to cope.
Data accuracy, reliability and good customer service will continue to be important factors for schemes when it comes to choosing administration systems and providers and they expect this to be delivered in a cost-effective manner. The results of this year's survey show schemes are willing to change their providers if they don't get the service they require and are willing to drive a hard bargain when it comes to price.
To read the full report as well as getting a full run down of what schemes think of the different providers and systems in the market contact Liam Barrett on
Professional Pensions Administration Survey Methodology
This report details the findings from the 2015/2016 Professional Pensions Administration Study, designed to track industry attitudes towards both in-house and outsourced pension scheme administration.
The study was conducted by Incisive Research on behalf of Professional Pensions. The overall aim of this research was to measure the different experiences of schemes using in-house and outsourced administration functions.
Interviews were conducted among a representative sample of 192 pension professionals in the UK. All interviews were carried out online using a Computer-Aided Web Interviewing (CAWI) process via the Incisive Research Survey.
Overall, some 42% describe their occupation as a pension scheme administrator or manager; 31% were trustees. The remainder of respondents' occupations included financial director and consultants.
Where possible we have tried to compare this year's results with the previous surveys to get a sense of any emerging trends and themes.
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