Thought / 16 Jul 2018

To transition or not to transition, that is the question

If your relationship with your pension administrator is on the rocks, there are several things you should consider.

It is important to think about whether your administrators are hitting service level agreement targets at least 96 percent of the time, especially with regard to retirements, transfers, and deaths.

Do you often not receive a stewardship report, or receive one with minimal data? Or are you spending far too much time discussing errors and complaints?
Moreover, think about whether your client relationship manager has a sound understanding of your scheme and the status of cases, or whether there is a rising number of ‘pending’ cases that never appear to be completed.

These are all signs that your administrator is taking you for granted or is underinvesting in their business, and indicates that it could be time to move on.

Is the grass greener?

Rather than diving into the unknown with a new provider, best practice is to visit a few first. While looking around, consider whether they are the sort of people you would like to work with.

How automated are their calculations and processes? Are letters, forms and booklets easy to read and simple to fill out? And do their stewardship reports allow you to get under the data?

Trustees should think about how robust and comprehensive the new provider’s transition methodology is.

And as part of your review process, do have a look at your costs. If you have been with your current provider for a very long time, you may be able to halve your annual administration charges.

If you have had a tough procurement approach in the past, perhaps you need to review your approach and be willing to pay a bit more for quality.

Key elements that need to be priced include transition, core annual administration, transaction thresholds and costs for extras.

Also, trustees should remember that a high-quality pension administration service at a value-for-money price does depend on standardisation and clear objectives. Keep your requirements simple, do not expect every extra to be included in your base costs, stick to the standards.

It is important to have sufficient time for an orderly transition to a new administrator. Many trustees only meet once a quarter and it takes time to make a considered decision.

Check your current contract for an end date and exit clauses – just the procurement process itself can take three months, and transition can take anything from three months to a year, depending on the size and complexity of your scheme.

Get support

There are a number of places where trustees can go for high-quality support when choosing a pension administrator.

An independent trustee may come with extensive personal experience. It is in their interest to make a good decision as they will have to live with it.

Pensions managers have a similar alignment of objectives with the scheme, but may or may not be networked in the market. Independent third-party advisers come with varied credentials. Be wary of those who try to squeeze the best deal out of your administrator as you could very easily land up with an administrator losing money and interest by the hour.

Choosing the right adviser is the single most important decision you will make – it will make or break your choice of administrator.

If you have followed the right process, your transition will be smooth and the end result better than you expect.

Whether your transition went well or not, it is important to share your experiences with other schemes to help raise industry standards.

Article originally written and published on Pensions Expert

Girish Menezes

Head of Administration