Pension administration – a tale of two cultures

This afternoon I’ll be chairing a session of a “strategic summit” on pensions that’s happening in the City of London .It’s good to be doing something live again and I hope to meet with more people I’ve missed.  London is slowly coming back to life but it is nowhere near the place that went into lockdown 18 months ago.

My session brings together Kim Gubler, doyenne of pension administration, Ralph Frank, who manages NOW’s pension operations and Pension Bee’s COO, Tess Nicholson. It should be a fascinating meeting of two cultures with Kim providing commentary.

The session is looking at the value for money that can be achieved from administrators

Will technology help to lower admin costs?
Investment costs are much lamented and subject to a charge cap, but pension schemes also face a much less often-discussed cost: administration fees. What schemes have successfully renegotiated admin fees and how have they done it? Will technology help to lower admin costs? Will consolidation result in lower admin costs?

PASA – a force for good

Pensions administration has historically been regarded as secondary in pension management. It is the chassis while investments are the engine. It is good to see these questions being asked as quality of service is one of the three aspects of pension “value for money”.

Margaret Snowden, Kim Gubler, Lesley Carline and a handful of others have over the years, changed this, creating PASA  the pension administration standards association.

Had it not been for PASA, good practice in administration would be sporadic, standards undocumented and those working in administration would continue to be undervalued. The pension industry owes a debt of thanks to these people and so does the public. PASA’s recent work helping administrators identify and stop pension scams in a casebook in effective implementation of standards.

PASA helped to drag pension administration into the 21st century but in truth much of it remains underfunded and under-appreciated.

The 20th century pension admin culture

No organization has suffered from the poor standards of pension administration so much as NOW pensions and it is to its great credit that NOW has lived to fight today. NOW chose to put its trust in third party administrators, outsourcing its payroll interface to Staffcare and its member record keeping to Equiniti. By the middle of the last decade, both of these administrators had made such a mess of it , that NOW had to switch member record keeping to JLT (now Mercer) and bring the administration of employer contributions in-house.

While the defeciencies of third party administration are still in evidence (witness the failure of JLT and now Mercer to offer a relief at source contribution option at a reasonable price, it seems that NOW has now overcome the issues that beset it and great credit needs to go to Ralph Frank and his team. NOW is still wedded to a 20th century pensions administration system but is adopting a modern culture of service.

The 21st century pensions culture

Nowhere does the phrase “if you want to go there , I wouldn’t start here” apply so much as to pensions administration. When Pension Bee started up in 2015, they would have been expected to do what NOW did and employ 20th century systems and service (as NOW did).

Instead, Pension Bee looked at the issue of pension administration as “customer service” and started out using Salesforce, its Customer Relationship Management system, to keep records and organise its communication with customers. Pension Bee kept its admin and support in-house, adapting Salesforce (which had never before been seen as a means to administrate pensions) to its own needs.

So rather than starting where the pension industry wanted them to start, Pension Bee started where it wanted to start. The result is an integrated approach which delivers a high quality of service because of the high level of automation in most processes.

Admiration for administration

It is hard not to admire both NOW and Pensions Bee in different ways.  I can understand why Pension Bee are fed up with NOW whose administrators still take far too long to administer simple DC transfers . 

I have sympathy for NOW’s new owners, represented by Ralph, who have inherited a lot of problems and are required to make the best of a bad job. If administration had been properly funded in the 20th century, its systems and processes would have been fit for the  purpose of auto-enrolment. As it was NOW relied on unfit systems which let them down. It is to its credit that it is standing up for itself and that Ralph is on the panel this afternoon. Administrators are never going to get an easy run.

But the future lies not in the 20th century but the 21st. Poor technology leads to low levels of customer satisfaction, high levels of manual intervention and the appalling costs of restitution. NOW has paid those costs. Pension Bee has not.

The costs of getting things wrong are born either by the shareholder or the member. NOW has not put up its prices but members continue to get sub-optimal service.

The reverse is true with Pension Bee who got their decisions right first time and have both happy customers and shareholders.

For more on this, you should be at the Andaz hotel this afternoon.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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