“Administration” has for decades been the Cinderella at the pension ball. Starved of investment , pension administration teams are typically underpaid and under-valued.
Fees for administration are often fixed by the scheme funder (historically the employer, more recently the funder of a multi-employer workplace pension) Sometimes there will be a per capita fee payable , but as pots proliferate, administrators are often left to negotiate the increasing burden of small pot records and claims when renegotiating contracts.
In short, relative to the fund platform and managers who receive ad valorem fees linked to fund growth, administrators rarely get a ticket to the main event and are left like Cinders, to gawp at more profitable participants in the pension food chain.
This is changing as the pensions industry wakes up to the threat posed to it from bad data. The threat comes in three directions. The immediate commercial threat is that defined benefit schemes that haven’t got their data in order are being put at the back of the queue as insurers determine which schemes they will “buy-out”.
The second is the looming threat that member data will be exposed to their view on a pension dashboard. Members will be paying more attention than ever before to their pension entitlements and so will the Pension Regulator. This is the same for DB and DC schemes. Matters are not made easier for public sector schemes because of the McCloud and subsequent judgements, nor by the rulings on GMP equalisation and reconciliation. Many legacy DC schemes are mired by guarantees including GMPs and underpins .
The third and most important threat to schemes is from claims against them either from members or from their lawyers where pension benefits are miscalculated.
For all these reasons, administration is becoming more important to pension schemes whether private or public, whether DC, DB or hybrid. But pension administrators tend to be pension wonks who aren’t good at explaining the importance of getting pension record keeping right.
They have found the pot to pay them being raided by communication and engagement specialists who are able to wow employers and scheme funders with promises of greater contributions and better scheme PR.
Pension administration is lucky to have its champions and for the last 25 years an organisation that stands up for them – PASA – the pensions administration standards association.
It has a trade body in the Pensions Management Institute that works with PASA in ensuring that standards are maintained through training of dedicated individuals who become career administrators.
Finally, it has in Lesley Carline, someone who – along with Kim Gubler and Margaret Snowden have become spokespeople for the importance and value of administration.
It’s very good to see Lesley appearing on the Pension PlayPen to give us her views and answer our questions. Administration is much more important than it has been credited for.
We are moving into a period where administration will be more valued. But we have not yet invested as we should in the new technology that could make administration both more accurate and our records more accessible.. I look forward to hearing from Lesley on Tuesday 28th February – details are below.
