In the third part of our series looking at what firms did to win at this year's UK Pensions Awards, PP speaks to Spence about how the firm won the Consulting Innovation of the Year accolade.
Video: Spence director Neil Copeland
PP: What does it mean to win this award?
AC: The team and I are incredibly proud of the "Spence Approach" and to be recognised at the 2015 UK Pensions Awards is fantastic.
Winning this award will hopefully go a long way to informing trustees and sponsors within the pensions industry that there is a better and more cost-effective way to manage their schemes.
PP: What do you believe sets you apart from your peers and contributes to this success?
AC: I strongly believe the Spence scheme management approach has revolutionised the way our clients' pension schemes are run, giving them access to the kind of analysis and advice previously reserved for only the largest of schemes.
By combining cutting-edge technology with expert advice both trustees and sponsors can expect automated daily administration and actuarial calculations, a clear and closely monitored funding and investment plan all for a known fixed fee.
By using a single platform to manage all scheme functions we are able to provide schemes with real-time reporting based on live scheme data. The system is built in such a way that our scheme actuaries are able to provide triennial valuation results within 24 hours of a scheme's valuation date. Instead of spending money on number crunching, our clients' budgets can now be better spent on strategy, developing solutions and achieving objectives.
Although innovative technology goes a long way to improve scheme management, it's what we do with it and the impact it has had on our clients' schemes which matters most.
PP: What are the key challenges facing your pension scheme clients and how are you helping them address these issues?
AC: Pension schemes are no longer working to an indefinite time horizon, where a check once every three years to ensure the funding plans are broadly on track is sufficient. The Spence approach focuses on three key areas to address this:
• An end to uncertainty - anything I can see my clients see too - the triennial valuation or annual funding update would no longer be a surprise, allowing trustees to manage long-term funding plan all year round.
• Quick and cost-effective decision making - the faster process will substantially reduce adviser costs and significantly reduce the risk of missing investment, funding and de-risking opportunities.
• Cost control - access to fully programmed and automatic calculations, allows schemes to focus your spending budget on solving problems rather than identifying and quantifying the issues faced.
PP: How will you continue to improve your services to pension scheme clients over the coming 12 months?
AC: One of the benefits of using proprietary software is the flexibility it provides to adapt to both market changes and our clients' needs.
I anticipate a strong desire from clients with closed schemes (87% of schemes are now either closed to accrual or closed to new members) to move towards an improved and more stable funding position.
To help clients achieve this, enhancement of our existing Trigger Point Monitoring functionality and development of Buy-in/Buy-out pricing information is well underway. Another key focus for us is the further development of our integrated investment consulting solution, and we will be adding online Stochastic Asset Liability Modelling functionality to support this.
These are just a few examples, but the additions will enhance decision making even further, ultimately leading to better governed schemes and the ability to quickly seize opportunities and mitigate risks as they arise.
Extract from Spence's original UKPA submission
In May 2014, Spence launched a defined benefit scheme management approach that completely changed the way pension schemes are run.
The Spence Approach combines technology with tailored advice to give trustees and employers automated daily administration and actuarial calculations; a clear and closely monitored funding and investment strategy; all for a known, fixed fee.
Traditionally schemes are managed using several distinct databases and systems to carry out scheme administration, audit data, provide actuarial valuations and track asset values - systems and databases that are often incompatible and leads to an increase in errors, timeframes and costs as data is transferred between systems.
Spence did away with this traditional approach and now uses Mantle, the only online platform that uses the same dataset to manage and integrate all scheme functions in real time.
This new approach means schemes no longer need to migrate data from one system to another, which allows for true automation and real-time reporting - and, as soon as a change is made to the administration data, this instantly reflects in the funding reports.
The system is built in such a way that Spence's actuaries are able to sign off a triennial valuation within 24 hours of a scheme's valuation date.
Yet, while Spence believes its technology goes a long way to improve scheme management, it says it is what it does with this technology that has the greatest impact on clients - and it certainly does not subscribe to a one size fits all approach.
As part of its approach Spence's actuaries, administrators and consultants focus on understanding each scheme before setting out tailored funding level objectives, a clear strategy, a funding path with clear trigger points and ongoing support and monitoring.
The UK Pensions Awards 2015 Winners’ Series
- How LaSalle Investment Management won the Alternative Investment Manager of the Year award
- How LCP won the Risk Reduction Adviser of the Year award
- How LGT Capital Partners won the SRI / ESG Provider of the Year award
- How PIC won the Risk Reduction Provider of the Year award
- How Spence won the Consulting Innovation of the Year award