Heywood Pension Tech
The transition to digital administration is a critical step for pension schemes. While it offers numerous benefits, such as improved efficiency, reduced costs, and enhanced saver experience, it also presents significant challenges.
In part four of Digital Admin series, we explore the key factors influencing the adoption of digital admin, including the role of data quality, technology and industry collaboration.
How will it work for us?
Ultimately, some schemes should consider whether full digitalisation of administration is even advantageous for them. What is the benefit of a smaller scheme for instance being fully digitised? However, if as part of a process to achieve full digitalisation, a scheme is undergoing regular projects on aspects of data, are those projects being delivered in a cost effective way?
It's recognised that these projects must compete with a resource that might be used elsewhere. And elsewhere – in house, or even at an administrator rather than one of the key advisers – that resource may go a lot further in the short term.
There is a confidence from the conversations we had with industry, as well as from the survey data, that improving data quality will also improve administration over the long term. All transactions be better, not just those at the top of the inbox today.
Part of this will depend on which group of stakeholders is leading the charge.
Stephanie Nuttall, head of pensions operations, Lloyds Bank: “The importance starts from the trustees’ appetite and as a pensions manager, you respond accordingly.
“So we have translated that into very regular reporting on data quality going through each level of our governance and actually dedicated resources within our team with a skill set and with the bandwidth to focus on data, data quality and data cleansing."
This may be due to the level of engagement from certain groups or it could be that more engaged trustee boards are bringing in and empowering advisers and administrators in order to drive change forward.
Keeping one’s eye on the prize
In fact, some of our industry commentators acknowledged it is quite common – indeed reasonable – for trustees and other advisers to defer to administrators on points of administration.
Timothy Jenkins, Rhondda Cynon Taf positively asks for engagement in order to challenge their own internal thinking to avoid groupthink: “We are constantly asking our staff and our colleagues to challenge everything that we do because it's really easy when you get into that habit of well, this is how we've always done this to keep doing it, because it works.
“And yes, it works, but technology has changed. Data transfer has changed. So many things have changed, so we should always be stopping and challenging: Is this best practice now or is there room for improvement? Are we asking for something unnecessarily?; Is there a better way of collecting that information from employers?”
Groupthink – or complacency – may be at fault for the dissonance we see in a question that concerned digital admin in general. While most respondents accepted digital administration would improve costs and drive saver engagement, 81% of those schemes have not even considered understanding the saver needs given the increased need for self service, and the eventual arrival of pension dashboards It seems strange that there would be such a high proportion.
This may come from an assumption that the vast majority of savers do not wish to engage with their pensions, yet.
They also understand that saver communication is difficult and getting savers to update their addresses will be a major breakthrough in itself. However, that won't satisfy requirements for DC schemes in the future.
But a number of schemes also suggested the old school DB paternalistic approach, can result in a subconscious “we know best” developing as groupthink even within DC schemes.
Stephanie Nuttall says that she doesn't think that comes from a place of arrogance, but a place of understanding of what the historic role of a trustee has been, and what DB schemes were there to provide.
We’re all in it together – how the industry can help schemes to help themselves
When asked if there was more the industry might do to assist schemes to improve adoption and implementation of digital administration, there were some interesting responses.
Considerable support for PASA and the PMI was shown, for their efforts in trying to instill a notion of best practice and to assist those trying to achieve improvement.
However many thought much could be achieved by schemes coming together in some way in order to share information, resources, etc.
This is commonly achieved in the public sector and LGPS, where schemes derive great benefit from coming together with employer groups to share data and ideas in order to find something of benefit for everyone.
This is more difficult for the private sector and there was a feeling that everyone is trying to recreate the wheel. There is, of course, a commercial advantage for providers and administrators because any work that needs to be done to tailor a basic system will attract fees.
However, while every scheme is different, there was a feeling that more might be done to achieve a better, more flexible ‘vanilla offering’ that might be updated, improved, augmented more quickly and cheaply in the future.
Some schemes will never be able to afford to put in place a bespoke digital scheme. Yet perhaps they can improve elements of their scheme that will help them reduce costs, drive up saver engagement and potentially improve their interaction with regulatory authorities. And perhaps if schemes came together more formally to discuss their needs with administration providers, more common ground might be found.
It is only the need to comply with regulation that is considered to be a strong enough driver to force all schemes to look to more fully and properly, at enriching and improving their data quality.
While the dashboard programme may help improve data, will this improvement benefit the average saver?
It’s widely acknowledged that digital administration offers numerous benefits, including improved efficiency, reduced costs, and enhanced saver experience. However, in order to maximise the use of resources, it requires a strategic approach, investment in data quality and collaboration among industry stakeholders. By embracing these principles, pension schemes can position themselves for long-term success – regardless of size.
This article forms the four part of a series that analyses the survey findings and the current position of digital pension administration in the UK. The full whitepaper is available to view here.
Read Part One - Digital pension administration in 2024 - where are we at?
Read Part Two - Digital pension administration in 2024 - ambition v progress
Read Part Three - Digital pension administration in 2024 - what the industry experts say
