In-house

Member alignment

For many schemes, the Pensions Administration function can trace its roots to ‘deposit admin’ with life offices in the 1970s. Some very large employers had their own departments from the outset. It is this latter model that emerged in the 1980s as the preferred approach, even for relatively small schemes. As funds grew and investments diverged away from life office funds, so too the administration migrated to a ‘scheme focused’ in-house approach. In-sourcing became in vogue and new computer systems made it very viable.
Today, it seems that only the larger employers have retained this approach. Smaller schemes have tended to out-source as a non-core activity. Nevertheless, in-house functions continue to provide focused and engaged services for their members.

Scheme focused

Software licences are available from the system providers to support administration – this is essential in the modern world of data management and complex calculations. Care and attention are needed to ensure that the latest updates are taken and that new functionality is leveraged. Old versions can become outmoded and may not ultimately be supported by the supplier. New releases need proper set up and testing and a specialist function often exists to perform this role. System specifications are vital to ensure the functionality can be understood and any changes properly implemented.
The in-house team will tend to be very close to the needs of members. They will also have in-depth knowledge of their pension scheme intricacies. This tends to allow them to engage with members through detailed conversations and communication material. This can be time consuming but is generally felt worthwhile and can deliver a great member experience.

The circle of life

With the advent of auto-enrolment, it may be fair to say that pension schemes are here for the long term. The question is, in what form? Many Defined Benefit schemes are heading towards a buy-in or buy-out pathway. If so, they could experience a full circle back to life office products. But that’s not the only pathway of course. Consolidators are on the rise and this will be an interesting space to watch.
Defined contribution schemes take various forms. Those under occupational trusts are under ever increasing governance regimes. Many are dealing well with this but others may simply prefer to migrate their pension scheme to a Master Trust. The economies of scale, streamlining, and robust governance offered by Master Trusts may be persuasive to some scheme sponsors and perhaps trustees. But choosing the best one for the long term requires considerable foresight in a market that is still relatively young.
Whichever, pathway a scheme is on, expert guidance is important to ensure the preferred provider is the best fit for the scheme and its members.