Automation improves insurer scheme admin but work still to do

Between April 1 2017 and March 31 2018, defined benefit pension schemes have reported approximately 72,700 transfers out, according to the Pensions Regulator.

RIGPS replaced JLT Employee Benefits with Willis Towers Watson as its scheme administrator on July 1 2016.

It has since documented widespread issues with the quality of its pensions administration in a series of newsletters to the scheme’s membership.

Nobody really knew the impact that pensions freedoms would necessarily have

James Peel, XPS Pensions Group

RIGPS has attributed much of the underperformance to the boom in DB transfers that followed the introduction of pension freedoms in 2015.

Trustee chair, Keith Greenfield, apologised to members for RIGPS's underperformance in a June 2017 newsletter.

In June 2018, he wrote: “I know that some members have continued to experience difficulties with WTW during the first half of 2018. However, I am pleased to report that there has been considerable progress in reducing backlogs and improving overall service.”

He added: “It is still not where we and WTW want it to be, but the plan to reach the agreed service levels is well on its way.”

The newsletter added that the scheme's benefit calculations have now been automated, and a "significant percentage of cases can now be run straight through WTW’s system”. However, some members are still unable to use this facility owing to data problems, which the administrator is currently resolving.

Over 80 per cent of new work is now being completed within the service level agreement required by the scheme, which the trustee expected to improve.

RIGPS and its administrator declined to comment.

Difficulties begin with transition

Following a review of the £3.2bn scheme’s administration that took place in 2015, the decision was taken to replace JLT after approximately 10 years of service that began in 2005.

RIGPS’s June 2016 newsletter states that “throughout the [review] process Willis Towers Watson impressed the trustee with their level of commitment to their customers, the efficiency of their operation and use of technology”.

Problems began soon after, however. In the scheme’s December 2016 newsletter, Greenfield wrote: “Although the transition was successfully carried out, I am aware of cases where members haven’t received the service they expected in an acceptable timeframe.”

In the following June, the scheme reported delays experienced by the administrator in the automation of calculations.

This was combined with “unprecedented levels of queries and day-to-day work requests being received by WTW”.

“The government’s pension freedoms have led to a dramatic increase in requests from members asking about the possibilities of what they can do with their pension benefits,” the newsletter says.

WTW was forced to deploy additional administrators. It started to automate its calculations with the aim of reducing the backlog of requests from members.

Gary Evans, head of Hymans Robertson’s third-party administration team, said schemes need to ensure that prospective administrators have the capacity to take on their new business.

Companies looking to take on new business should "have 90 per cent of... calculations automated," he said

These should be completed by the time the administrator has formally started its work with its new client.

“For that half or 60 per cent of work that’s about calculations, if that’s not highly automated, you are going to struggle,” he added.

Automate your calculations

In May, the regulator’s corporate plan highlighted the administrative risks associated with rising transfer volumes.

It observed the opportunities and threats of technological innovation to schemes.

“Automation is definitely the way forward,” said Julian Mainwood, a partner in Barnett Waddingham’s administration practice.

Engaging members with automated processes remains a key challenge for schemes, and this is often dependent on the nature of the workforce, Mainwood observed.

“We find some schemes have good take-up rates on it when online is offered to them, and others less so,” he said.

Were administrators ready for freedoms?

Over 80 per cent of new work is being completed within the terms of the SLA, although the scheme said this percentage "needs to continue to increase”.

James Peel, head of client management at XPS Pensions Group, recognised that the surge in transfer values may have created challenges for administrators.

“Nobody really knew the impact that pensions freedoms would necessarily have,” he said.