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.
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.