Heywood Pension Tech
Heywood and PASA conducted a survey at the end of 2023 to understand the state of digital administration in pension schemes and what challenges administrators faced today.
It's important to note that whilst the research was conducted during the Pensions Dashboards Programme (PDP) reset in 2023, the survey did however capture a mismatch between what some schemes say is important and what they are doing - a conclusion that was also reached by the PASA Data Working Group in an industry survey last year.
What is clear from the survey findings is that regulatory compliance trumps all other functions, including improvement of digital admin that would make compliance easier, cheaper and more meaningful.
Where are we heading?
Currently, there is a mixed level of digital implementation taking place among UK pension schemes. Only 64% have a digital records database that is neither scanned PDFs nor paper based. While that may sound promising, that means more than one third still rely on non-digital means to record their pensions data.
When we look at the frequency for gathering or improving digital data, three quarters (75%) of schemes do ongoing data cleansing for mortality. However, data cleansing for existence checks comes in at under 56% (55.5%). And one third of respondents will only improve that within the next 18 months.
Just over four out of every 10 schemes do ongoing data enrichment to add details such as email addresses and spouse names, while just over a quarter (27.8%) will be doing this in less than 18 months. However, almost one fifth (19.4%) do not even yet have this on their digital roadmap.
A fragmented approach
The survey also highlighted low levels of automation across several different processes aligned with the pension administration process. Fewer than half (44.4%) of schemes have automated their payroll process, exactly one quarter (25%) have automated treasury processes and fewer than one third (27.8%) have automated their accounting processes. But more worrying must be the fact that only just over a third of schemes (36%) have automated their administration process.
This data could suggest that pensions administration is being excluded, or at least held at arm's length by one side of the organisation or another.
Indeed, the ability to share data with both internal (44.4%) and external (52.8%) departments or agencies seems rather low. In fact, only just over half of all schemes (52.8%) have automated more than 80% of their benefit statements.
These low levels of automation of digital processes may be a limiting factor on the adoption of digital admin.
Dashboards are only part of the problem
In the survey and subsequent interviews, it should come as no surprise that pensions dashboards feature heavily. Almost nine in every 10 (86%) consider connecting to pension dashboards to be an important matter (with 55% considering it most important).
While half declared themselves ready for dashboards, fewer than 40% could verify digital identities, while fewer than 60% are able to do bank account verifications digitally. This is at odds with the importance schemes told us they place upon the threat of cyber risk, though only one of these capabilities are to be compulsory.
Four out of five schemes (78%) said that digital records are very important. Almost as many (75%) also consider ongoing data cleansing (ongoing mortality and existence checks, for instance) to be very important. However, when it came to ongoing data enrichment, covering such data points as adding spouses or email addresses, this figure dropped below 50% (47.2%).
It’s encouraging that most schemes consider digital records to be very important, but what is apparent is the level they are prepared to take them to varies across the industry.
This article forms the first 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.
