Thought / 24 Jan 2018

What does great administration look like?

The new ‘Freedom and Choice’ legislation introduced by the government has negatively impacted pension administration delivery. There are a growing number of pension administration firms who takes weeks, or even months, to turn around member requests. This is aggravated by the fact that some administrators continue to work through member calculations on paper.

Even firms with electronic data do not always automate their calculations and have poor or non-existent workflow. Rework rates of over 20% are common. Members can experience abrupt and even rude responses from stressed administrators.

Trustees can go for months on end without a Stewardship Report, SLA’s in the mid-80s and massive backlogs. The increase in Transfer-Out requests are resulting in Transaction Fees of anything between 30% and 100% of core fees. With such a low bar, what should Trustees and Pension Managers be looking for in their pension administrator?

Consistent SLA’s

Trustees are often happy with the industry-standard SLA delivery target of 96%, though there is no reason why SLA’s should not be nearer 99%. However, they are far more focussed on how often these are met and with what consistency.

The ‘freedom and choice’ legislation definitely impacted work throughput. However, shouldn’t firms have dealt with this legislation by now and resourced up for the new normal? If your Administrator cannot deliver the required SLA standards, they should have clear reasons as to why this is the case and a credible strategy to bring your administration back to agreed benchmarks.

Day zero backlog

A clear marker that identifies the root behind low and inconsistent SLA’s is the backlog. Work should start on a case the day it arrives. This ensures that there is sufficient time to plan ahead and it is only the errant case that slip through the cracks. A large backlog needs detailed analysis: the number of cases by type, mapped against appropriate resources available to complete these, over and above the business as usual tasks.

The average administrator has no incentive to work late and on weekends, even if they are paid overtime. They have families to go home to, vacations to take and celebrations to attend. Contract staff take time to be on-boarded, they are premium priced and require comprehensive training. Backlogs are notoriously difficult to reverse by an incumbent administrator.

Premier's SLA delivery rate throughout 2016/17
Premier's rework rate throughout 2016/17

Low rework rates

Rework rates are easy to audit and speak volumes about resourcing levels, automation and training. Poor quality administrators can have rework levels of anything between 20% and 30%. As administrators tire, they let things slip and error rates accelerate.

There can be a lag of months or even years between the original issues emerging and being hit by the complaints caused by the errors. Rework rates must be tracked, root-cause-analysis carried out and action taken to consistently push these rates down to zero.

Article originally published in Pensions Age January 2018 edition.

Girish Menezes

Head of Administration


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