Bob Ward, someone who I’ve known as a deep thinking on pensions administration since the days of Papdis and our hopes of simplifying AE contributions, has this to say as a comment on a recent blog on CDC administration of a future whole of life CDC scheme.
Following recent conversations my thoughts on the way forward for administration are two-fold:
AI In Practice
1) Contributions, Transfers-in, and Transfers-out should follow the traditional pensions administration with current improvements to transactional integrity, fully automated Straight Through Processing, communications (with employers and Employees/Members);
2) Investment allocations, fund administration, adjustments, provision of pension income should follow Fund Management and Pensions in Payment specialist systems.
Current traditional UK pension providers have been able to work with existing historical pension systems with enhancements along the way, predominantly due to improvements in technology processes, for fund allocations of the same £ for £ value.
They have not had to deal with the two aspects of accumulation and then diversion into an alternative ‘value’. The CDC administration should thus be an amalgam of the two styles of admin systems – Pensions Collection and Fund Investments/Payroll (for whole of life) which have different allocation and payment styles, requiring now a two-way bridge between.
AI compliance
I have recently been involved in AI compliance which I see as the way forward for information, member communications, statistical analysis and reporting.
AI is still in it’s infancy within the pension environment and not in use in developing or financial administration of schemes let alone a new hybrid administration system.
Pensions in payment are accounting functions in a strictly controlled environment following set rules embedded in set compliant systems and processes.
There should not be any room for potential interpretation or variance. I would therefore NOT advocate AI being involved in any decisions required in servicing members pension payments.
AI going forward in a world that includes CDC
I have sat through a number of sessions engaging with the use of AI in pension administration and have not been as clear about a position as I am in reading Bob Ward’s statement.
I am sure that many readers of this blog are as involved in the inclusion of AI in pension administration and member servicing and if you have thoughts, please include them in comments or send them to henry@pensionsmutual.co.uk or henry@agewage.com.
Now is the time to get the guardrails in place, whether you sit on the side of the proprietor and trustee or on that of the Pensions Regulator.
I can think of few matters that are of such fiduciary importance, on this the development of a better system of pension administration depends and (more importantly) operational efficiency for employers and value for money for members .