The Royal County of Berkshire Pension Fund saved an estimated 604.1 hours of administrative work over six months, and ended its struggles with updating member data by introducing an automated data exchange.
Despite the oft-praised efficiency benefits, experts said take-up of automated data feeds has been relatively slow, in part due to the wide variation of systems and processes among pension schemes.
Many employer administrator data exchanges still rely on passing data back and forth via email, which is an inherently insecure method that can easily be intercepted
Daniel Taylor, Trafalgar House
The £1.66bn Berkshire scheme said its decision to implement Aquila Heywood’s i-Connect software in February 2016 was driven by difficulties obtaining timely and accurate member data from employers.
“The Berkshire Pension Fund highlighted that a regular, electronic transfer of pension data would be essential for future efficient pension administration, increasing quality of data held and reducing the number of errors and queries,” said Steve Lyon, responsible for technical analysis at the scheme.
Meanwhile system providers Aquila Heywood said improving efficiency was a particularly pressing need for public sector schemes.
“The introduction of [career average revalued earnings] for public service pensions schemes, aligned with the growth of employer volumes, has significantly increased the pension administration burden on both the pension schemes’ administrating authorities and participating employers,” said Mark Lecompte, director of customer relationships at the company.
“In addition, the requirement for more real-time data exchange, accuracy and reporting has compounded the challenge.”
Efficiency drive
By August, Berkshire had saved an estimated 604.1 hours of work, which at a typical administrator’s hourly rate would equate to a saving of £6,735.
The Royal Borough of Windsor and Maidenhead, the administering authority for the fund, also saw a 76 per cent reduction in the number of reports produced by its payroll department after piloting the software with 15 employers.
It now spends just half a day a month on payroll data transfers, compared with 12 days previously, and plans to roll out the software to an additional four sponsors.
“I think this is ultimately the holy grail,” said Giles Payne, director at professional trustee company HR Trustees, highlighting the potential impact of inefficient data processing on other areas of scheme management.
“Sometimes contribution investment can be held back by lack of data,” he said.
Payne explained that trustees are not reluctant to embrace data automation, but rather there are some obstacles to implementation, including necessary due diligence around data protection.
“It’s certainly not difficult to overcome, it just needs to be ticked off,” said Payne.
Secure your data
Industry concerns around data protection in pensions have been growing for some time, with Lesley Titcomb, chief executive of the Pensions Regulator, warning schemes to include cyber security among their key risks in September last year.
“It is trustees who are the data controllers under the data protection act, so it is the trustees who must make sure they have all the proper protocols and policies in place, and that any third parties they use also have the appropriate controls in place,” she said.
Automated data exchanges should boost the overall security of pension schemes against cyber attacks, as Daniel Taylor, director at administration specialist Trafalgar House, explained.
“Many employer administrator data exchanges still rely on passing data back and forth via email, which is an inherently insecure method that can easily be intercepted,” he said.
NESPF saves 108 days with new payroll software
North East Scotland Pension Fund has made “huge savings” in administration costs and time through its new payroll software, allowing it to focus on the changing structure of the Scottish Local Government Pension Scheme.
Taylor explained that even if administrators have taken steps to secure their outgoing emails, less rigorous employer procedures could prove the weak link in the chain.
“Implementing automated electronic data exchanges goes a long way to mitigating these risks, by implementing a set of enforced security protocols that cannot be circumvented, forgotten or ignored by users,” he said.
He echoed Payne’s praise of systems such as i-Connect, noting the potential dividends in the form of risk and error reduction.
“I’ve seen manual data exchange, validation and upload processes take up to two weeks to complete, and the same process that is delivered through an automated employer data exchange take less than an hour – delivering better results and a more secure data flow,” he said.
The graphic has been changed since the article was first published to accurately reflect information contained in the article.
