Heywood Pension Tech
Heywood and PASA’s Digital Administration whitepaper asks the question, ‘where are we in 2024’? The paper focuses on original research that aims to temperature check attitudes and progress towards digital administration in the pensions industry.
In part three of our series exploring the paper’s findings, we hear from prominent voices in the industry about the role data plays in digital administration.
What the experts said
Firstly, it’s important to address a key concern about delivering digital administration – cost. A long-term obstacle to a utopian world of consistently clean data and first-class digital administration services.
Stephanie Nuttall, head of pensions operations, Lloyds Bank said: “This is not a criticism of providers, but administration as a service hasn't been afforded the value that it should have been over a long period of time. It's all been about driving down per saver cost to the lowest possible level. It hasn’t been an attractive service line when there is investment money available, and so there hasn’t been a proliferation of new ideas or new technologies coming forward.”
Each scheme considers itself to be different, but many use this as justification for not doing something, because it will be too difficult and therefore too expensive.
Jim Woodlingfield, deputy head of service delivery, Surrey County Council: “A lot is driven by the fragmented nature of the sector. Each scheme is quite specific, has its own requirements, with its own rules, regulations and membership. So it's hard to have a one size fits all approach in the way that maybe banking or investment products might have.”
There’s a hesitancy in pursuing data goals
Cost plays a role in data services too. As we explored the interplay between data and digital admin, many suggest that unless you have an overarching reason for pursuing ultra clean data in DB schemes for the reasons of compliance with legislation, satisfying requirements for GMPs, the pensions dashboard programme – an issue for DC schemes, too – or are nearing the end of the endgame roadmap, then biting the bullet on digital admin simply is not going to wash with the scheme.
While it may drive down costs, how the benefits might be experienced, measured and monitored may not have been decided. There are always many other hungry mouths to be fed from a purely operational position and so digital admin gets put on the back burner. Again.
For this reason, if anything needs to be done to improve administration, regulatory oversight will always take precedence.
Gillian Bell, senior administration consultant, third party administration, Hymans Robertson: “Legislative changes always take priority over any digital development, which presents resourcing challenges as a result of having to direct resource to any legislative changes.
As we saw in the survey results, some schemes believe that digital admin isn’t necessary, because they don’t understand how it will improve their processes, or don’t understand how they can extract more benefit than the cost of innovation.
Everyone knows data is essential, but nobody seems to understand why
That data is important to a scheme is considered a universal truth. What seems to separate schemes is the level to which they are willing to embrace that ‘truth’ within their own processes.
Jim Woodlingfield, deputy head of service delivery, Surrey County Council: “Data is absolutely key. It’s one of those areas that informs all aspects of pensions, across actives, deferred and pensioners.
“It’s what the liabilities are based on, so if your liabilities are wrong, your funding strategy could be wrong, as could your investment strategy. That can have a massive knock-on effect. Member experience is also crucial. If information is wrong, or the process is slow because the person has to confirm things, then go back to their employer and find more details, then that gives them a bad experience.”
Poor data doesn't just cause problems with calculations but raises saver queries and requires increased intervention from administration teams or on the part of third-party administrators or other advisors. This all undermines the efficacy of digital systems and adds considerable cost into a process that is already stretched. So bad data is expensive for schemes, right?
“I think good quality data is critical,” one senior scheme manager told us. “Inaccurate data just prevents so much work being done. It also generates queries from savers.
“If you're looking at self service or online portals and have mismatching data, it prevents automation if you're automating and you've then got 20% fallout because the data isn't accurate. It’s not helpful”
Even schemes that are doing regular updates – and even enrichment of data – must commit to ongoing continual efforts in this area,
Russell Whitmore, head of administration, Smart Pensions (formerly Evolve Pensions): “Once it's up to date, it starts to degrade and the best thing that you can do is have regular data enrichment. It's not cheap, but…it’s cheaper once you've cleaned it, and then the regular updates can be part of the service agreement.”
Some will shake their heads and consider that to be going too far. But this undermines any assertion that schemes do not embrace digital admin because improving data is simply too expensive. Bad data makes for bad admin.
Data gathering isn’t a one and done undertaking, so it must be repeated and regularly. But such a methodology is likely to tick more boxes on a cost/benefit analysis than simply focusing on the cash value of the project.
Even those who are cool on digital admin understand that even if it stops at self service, data is least critical to a scheme, because without it, transactions cannot be executed.
It was clear from both the survey and industry interviews that good data is essential, but that bad data is not just an “internal problem” to be managed and worked around. Bad data is the enemy of digital admin, as it perpetuates bad processes, creates more queries requiring manual intervention that would not be necessary if data was clean in the first place.
What good data looks like
Of course, there is no single view of what good data looks like. One scheme told us that “it's whatever TPR says it is”, whereas others think good data requires proactive gathering and collaboration with other employers within their group to ensure it is not only gathered in a timely fashion, but consistently and to the same standard. That way, the administration function can provide each employer with a consistent level of service.
But when it comes down to individual schemes, each scheme focuses on what makes them different and what must be achieved within the priorities of each scheme.
Quite a number of schemes that we spoke to are introducing more regular reporting to keep data fresh and identify any weak areas.
Woodlingfield at Surrey County Council tries to give trustees as much information so they can make governance decisions about the data and administration function.
“They [the trustees] can then make a decision as to what is an acceptable level of data. We can also try to give them additional context, but we also want to test the quality of that information, to ensure it isn’t simply random information.”
Schemes that do regular data searches, enrichment, or even projects such as GMP or the pensions dashboard, may find it easy to believe they now have good data.
Yet, the data gathered for different projects may be good data within the context of each project. Schemes must understand the use case for the data within the context of how that improves their overall processes.
How schemes allocate time and resource to administration projects varies wildly. Often, it’s done on a last minute or ad hoc basis. At other times there are regular projects.
But as Woodlingfield told us: “What gets measured is what gets done”. If you’re not measuring something, you cannot be sure that any progress you make is aligned with your ambitions.
We found that improvements are possible and once enshrined in regular processes, need not be onerous. Data that is measured gets improved and that once improvements have begun, schemes must continue to challenge their own assumptions to ensure data quality does not deterioriate and continues to improve.
This article forms the third 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
