This year, resolve to make your good administration great
Geraldine Brassett, client relationship director at Capita, proposes five New Year resolutions to help your pension administration get into great shape in 2019
Administration gets tougher every year. Changes in legislation, data security issues, increasing member choice, all add to the pressure felt by administration teams that are already being stretched. And on top of that, members now expect levels of service that reflect their experience of retail finance and insurance. If they’re not met, their trust in their pension is eroded. And all the time, sponsors are looking for greater efficiencies and the media’s scrutiny of schemes intensifies.
Here are five ways schemes can work with their administrator to improve both member experience and efficiency.
1. Anticipate change
Legislative change is a fact of life. Pension freedoms, rulings around GMP equalisation, the latest Statement of Recommended Practice (SORP), are just a few of the changes that add to the administration burden. Add in GDPR and preparations for the pensions dashboard and it’s easy to see why workloads are about to soar.
These changes have big implications for systems, processes and communication. That’s why it’s important to make sure you have people with the insights and experience to anticipate and prepare for change rather than just react to it. It’s also why schemes need to make sure that the different disciplines are working together effectively and seamlessly. Do you have all the right people in place? Do you need to find technical, systems, administration or project management specialists to improve your in-house team? Given the need for specialist skills, would it be better to outsource some or all of your administration to a team of specialists? If you already outsource, are you making the most of your provider’s expertise?
Make sure your scheme has the skills, experience and resources it needs to anticipate industry changes. That way, you can be proactive rather than reactive and adapt in time to handle them.
2. Interrogate your technology
Pensions aren’t immune to advances in technology or shifts in the way people interact with it. But we often lag behind best practice. So future-proof your systems – from your communication channels to the platforms that underpin your operations. Ask some tough questions.
• Can your systems keep up with legislation changes?
• Can they reach members in the way that members want?
• Are they flexible enough to interface with other systems?
• Can they cope with members’ increasing demand for digital communication?
And, if you’re using multiple platforms, weigh up the cost and benefits of investing in a single, integrated system.
Recently, we helped a pension scheme create an automated function that allowed members to request and receive information online. This meant members got what they needed in two hours instead of two days. It also freed up the customer service team to deliver more valuable work. Investing in technology like this doesn’t just improve the member experience, it can also free up vital resources.
Whatever state your technology is in, put together a clear roadmap for developing it, covering levels of investment, functionality, digitisation and cyber-security risks.
3. Scrutinise your data
Pension schemes hold huge amounts of member data. But it isn’t always accurate. And too often these inaccuracies only come to light when there’s an urgent need to contact members about a problem they’re facing or a choice they need to make. Recent rulings around GMP equalisation are likely to uncover data shortcomings in many schemes that have so far gone unnoticed. One problem can be a scheme’s approach to tracing its members:
• 1 in 4 schemes either don’t actively trace members or have no formal process in place
• 1 in 8 schemes use only the DWP to trace members
• 28 per cent of schemes with assets over £300 million don’t use a specialist tracing agency
As a result, schemes are at risk of not paying members or of making fraudulent payments. They can also fail to update members about their benefits, investment performance and retirement options.
Just like groceries, data has a shelf life. The moment you do a data cleanse or update, it begins to ‘go off ’. And as the workforce becomes increasingly mobile – 25 per cent of 25-34-year-olds have already amassed six employers – the need to keep on top of data becomes even more important.
So, don’t just regularly check your data, but continuously monitor and update it. And if you haven’t assessed your data in the past two years, don’t put it off any longer.
4. Put members in the picture
Pension freedoms mean members have more choices to make about their future than ever before. It’s our job to help them. Our surveys consistently reveal that almost half of employees find pension terminology to be complicated and confusing. But improving the language we use is just the first step.
We need to find out more about what people need from us – as opposed to what we think they need. We also need to identify demographic splits. For instance, our survey shows that 47 per cent of 16-34 year-olds would like pensions communications quarterly, but this drops to 14 per cent for over 55s. Similarly, research suggests many members now prefer to get communications digitally.
Member feedback can help you work out what people need to hear and how they want to hear it. Microsites – small, tactical websites designed for a particular audience – are a great and increasingly affordable way to help members engage with their scheme. They can be easily tailored to the needs of just one group of members – actives, deferreds, even potential employees – and accommodate interactive tools and modellers that help build people’s confidence around decision making.
But there are simpler ways of helping people too. One of the most effective ways to reach members is email. In a recent campaign for Sky, we sent out a device-responsive email to 12,851 employees. 57 per cent of them opened it and over 2,000 of those people clicked through to find out more. This compares to an industry average email open rate of just 21.5 per cent and a click-through rate of 2.4 per cent. The more you know about members, the more targeted and tailored your communications can be. Once you understand your members, put metrics in place to measure their behaviours. You can then evaluate your communication strategy based on the changes in behaviour that it’s delivering – or failing to deliver.
5. Increase value for money
Whether schemes are administered in house, by a third party or a mixture of both, they’re increasingly under board scrutiny. This is particularly true of larger schemes. In a recent survey, we found that all 36 schemes with assets over £300 million had faced pressure from their boards to reduce costs. And only one in five schemes with assets under £300 million said they hadn’t faced this pressure.
To reduce that pressure, schemes need to ask themselves:
• Could time and money be saved by using a single third-party provider rather than multiple providers, or by outsourcing more services?
• Is there an opportunity to contain and predict outsourcing costs by clearly defining core services, capping transactions or changing how your provider charges for non-core work?
• Could communication costs be reduced by moving from print to digital and by adopting industry standard communications, like the new Standard Annual Statement?
To keep cost down and quality up, look to use industry standard processes where possible, question budgets regularly and look for economies of scale.
These resolutions aren’t just for 2019
Whether you’re looking to improve your technology, your teams, your communications – or all of these – it’s important to reassess them regularly. This isn’t a one-off to do list, it’s a yearly, quarterly, or even monthly checklist. It will help you stay ahead of the challenges your scheme faces in 2019 and in the years to come.
** You can also find this article in the January 2019 edition of Pensions Age Trustee Guide.