The world of pension scheme administration is undergoing a period of profound transformation.
The demand for pension administration services is skyrocketing, with work volumes surging across the board. In particular, Defined Benefit (DB) schemes are grappling with an aging membership approaching retirement, a surge in project work, and a raft of regulatory changes.
This article delves into the key challenges faced by administrators and explores how they can navigate this perfect storm, focusing on resource management, technology integration, and structural optimisation.
The resource crisis
One pressing issue facing pension scheme administrators is the looming resource crisis. DB schemes, a mainstay of the industry, are experiencing an aging membership, with many members fast approaching retirement. The increased demand for quotes, pension pay-outs, and member services, combined with the sad reality of members passing away, is driving up work volumes.
While the overall DB membership is decreasing, the workload is expected to surge due to an array of projects, including GMP rectification and equalisation, de-risking activities, and regulatory changes like the McCloud reforms in the public sector. This perfect storm is further intensified by a shortage of experienced administration staff. Many are retiring, a trend accelerated by the Covid-19 pandemic.
To further compound this, the administration market is contracting; be it through consolidation or traditional administration providers either becoming more selective in their pursuit of new business or moving away from the administration market altogether. This confluence of challenges necessitates a reimagining of how the industry operates and how to maintain quality service during this tumultuous period.
The different approaches administrators can take
Administrators must adopt innovative approaches to address the resource crisis in pension scheme administration. The following areas are ripe for exploration:
1. Resource management
To combat the resource shortage, administrators can consider several strategies:
• Recruitment and retention: administrators should think creatively about recruiting from national resources, especially given the widespread acceptance of remote working. This approach can help tap into a broader talent pool. However, conversely this also poses the risk of staff attrition to other firms that were previously geographically inaccessible to employees.
• "Grow your own": training academies can accelerate the development of new talent, reducing time to competence. Administrators could work on making a career in pensions administration more appealing through better pay, clear career progression frameworks, and flexible working arrangements.
• Flexible working: adopting flexible working hours, office-hybrid models, and remote work can help administrators cater to a diverse workforce and provide more responsive service to members.
• Succession planning: developing the next generation of administrators and experts is crucial to mitigating key person risk. Administrators should focus on equipping future professionals for the roles of pensions technicians, project managers, and client managers.
2. Technology integration
While not a panacea, technology can significantly assist in addressing the resource challenge:
• Automation: increasing automation and enabling straight-through processing for simpler cases can reduce the burden on human resources.
• Self-service: encouraging members to utilise self-service portals for routine tasks frees resources and can lead to more timely service. Members can access essential documents online, view payslips, and benefit statements, which can also reduce printing and postage costs.
• Process optimisation: streamlining and standardising administrative processes can free up experienced staff to focus on more complex, sensitive cases that require a human touch.
3. Structural optimisation
Administrators should evaluate the structural components of their organisation:
• Business structure: separating key functions, such as day-to-day administration and specialised project teams, can enhance efficiency. This ensures that the knowledge required for specific schemes is shared effectively across teams.
• Global delivery model: exploring a global delivery model can create additional capacity, open up access to a talented resource pool, and enhance service resilience.
• Partnerships: recognising the value of specialist firms and forming strategic partnerships can alleviate workload and leverage external expertise, technology, and resources.
4. Key takeaways
The challenges confronting pension scheme administrators are well-documented, but they’re not insurmountable. Innovative solutions are at hand.
• Technology: invest in automation, data cleansing, and member self-service to boost efficiency.
• Approach: assess your administrator structure and team setup to meet both daily needs and project demands. Consider partnering with specialists for certain projects.
• People: prioritise recruitment, retention, and succession planning to ensure the availability of key talent. Leverage experienced resources effectively.
Ultimately, if we’re looking for exceptional pension administration, we must be willing to invest in it. These are exciting times for the pension industry, full of opportunities to innovate and rise to meet the resource challenges ahead.
Find out about our pensions administration services and software:
Fraser Stewart
Business Development Manager – Capita Pension Solutions
Fraser has 15 years’ experience in the pensions industry and has worked across several pensions administration, bid management and client facing roles. In his current role, Fraser is responsible for the development of Capita’s administration services. He is an Associate of the Pensions Management Institute and an active contributor to the Pension Administration Standards Association.
