Will the events of 2020 accelerate the changes to the management of in-house pensions administration? Every firm’s business continuity planning has certainly been tested over the last few months and we all will have things to learn from the experience, but it has highlighted some specific risks for smaller in-house pensions administration teams.
There has been a steady move away from in-house pensions administration over the last decade or so to outsourced administration solutions with third-party administrators (TPAs). This has been driven by the need to access modern systems on a cost-effective basis and to manage key person risk.
There is no doubt that the personal touch of the in-house team, with an ever-present understanding of its own business’ culture, is hard to beat and often highly valued by the pension scheme membership. However, many TPAs have learnt to replicate the ‘in-house’ feel, with the added benefits of additional resources and specialist support. If the right culture match is made between the business outsourcing their pensions administration and the TPA operation, the culture barrier can also mostly be managed.
Current circumstances have highlighted some of the challenges for in-house teams:
In my conversations with TPAs over the last few weeks, I know that many of them are of the opinion that the next few years will continue to see more in-house pensions administration services outsourced. Whether the impact of the events of 2020 will accelerate that trend remains to be seen but there is certainly evidence to support such a theory.
Lisa Riordan is Head of Procurement at Pi Consulting, responsible for conducting pension adviser reviews. Over the last 16 years, Lisa has led on numerous TPA evaluation projects, from operational reviews (working to improve TPA service delivery for trustees) to procurement exercises (identifying the right TPA for trustees and ensuring the service transitions successfully).
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