This year's survey reveals what schemes are looking for in administration systems and third-party administrators, and highlights the key providers.
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 were responsible for defined benefit (DB) schemes, with the next greatest proportion managing defined contribution (DC) schemes. Other scheme types such as hybrid schemes make up the remainder of the scheme types represented in the survey.
Almost three-quarters (74%) of responses came from DB schemes and 13% came from DC schemes.
This year's survey saw a change in the proportion of respondents holding their administration in-house versus those who outsource - with 81% of respondents outsourcing the administration for their main scheme and 19% keeping their administration in-house.
We received responses across a whole spectrum of schemes in terms of assets under management. Almost one-quarter (23%) of those who responded to this year's survey ran assets of more than £1bn; a further 10% of schemes were worth somewhere between £500m and £1bn; and 21% of schemes were worth between £100m and £500m.
Smaller schemes also responded to the survey, with 19% of respondents having assets of less than £25m. A further 15% of responses came from schemes worth between £25m-50m and 12% came from schemes worth between £50m-100m.
According to our research just under one-fifth (19%) of respondents choose to keep their scheme administration in-house.
So what are the reasons behind the decision to keep scheme administration in-house? There are many it would seem but this year cost control was cited as the primary driver, having a weighted importance score of 68. The next most important factors were quality of service (51), level of expertise (40) and flexibility (35).
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. Schemes who have in-house administration commonly choose to outsource elements such as 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. Just over two-thirds (67%) of schemes managed in-house said they assessed the efficacy of their administration through benchmarking.
The next most popular method was having a regular review - 47% of scheme participants said they held quarterly reviews and 40% said they held these annually.
Complaint levels were also a popular way to judge performance with 42% of scheme participants choosing this option, while 40% of those who answered the question said they gauged the efficacy of their administration by using member surveys.
Surprisingly perhaps, 40% of survey participants said they had no process in place to measure the performance of their administration.
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. Eight 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 4.84 out of five. This was followed by reliability, which scored 4.81 and value for money with 4.44. Technical support (4.42) and good customer service (4.40) 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 3.16 followed by Procentia's Intellipen (3.04) and Capita Employee Benefits' Hartlink (2.97).
We then moved on to those schemes that chose to mainly outsource their scheme administration.
We went on to ask their reasons for outsourcing their administration. Two or three key reasons came up, with technical expertise being most popular, with a weighted score of 329. This was followed by those respondents citing insufficient internal resource (287). Providing a better service to members was also important with a score of 183.
Of those respondents whose schemes outsource their pension administration, a considerable number continue to administer some part of it in-house. Member communications was the most popular element to keep in-house and was cited by 24% of those who answered the question. Other important elements to keep in-house include finance (14%), accounting (17%) and legal (6%).
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 4.90 out of five. This was followed by reliability (4.82), good customer service (4.61) and value for money (4.36).
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. PS Administration led responses, being used currently by 45% of respondents. Other TPAs with high response rates include Capita Employee Benefits, Mercer and Barnett Waddingham (currently used by 14%, 9% and 9% of respondents respectively).
In terms of satisfaction scores among TPAs, PS Administration came out top with an overall score of 4.10. They were closely followed by Premier (4.04), Barnett Waddingham (3.72) and Willis Towers Watson (3.56).
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. Nearly half (47%) said their administration costs had risen over the past year while just 11% said they had decreased. However, costs remained unchanged for 42% of those who answered the question.
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 Brexit and legislation.
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. Dealing with Brexit, complying with pension flexibilities 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.
This week's edition of Professional Pensions is out now. Click here to read it.
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