Rory Murphy, former chair of the Merchant Navy Officers’ Pension Fund, calls for urgent action to raise administration standards and stop members from being negatively impacted by poor practices.
For most organisations that provide products or services to consumers, the ‘customer experience’ is, or should be, the single most important thing to get right.
Give the customer a good experience, and they’ll stick with you; get it wrong and not only have you lost a customer, but you may also have lost everyone they share their experience with.
But for some pension schemes, this fundamental truth seems somehow to have been overlooked, or at least to have drifted down the priority order.
Admin failings and the impact on members
Three of the biggest areas for complaint among pension savers are customer service, lack of transparency, and unreliable handling of data – all of which relate back directly to poor pensions administration.
We can speculate as to why this might be such an issue for pension customers in particular. I suspect some schemes lack any real incentive to improve the customer experience or to address the poor administration practices behind it.
As thousands of members of the Civil Service Pension Scheme can testify, a bad pension experience isn’t necessarily something the customer can just walk away from, or take their business elsewhere.
“The perception of administration as a low-margin and low-value function has long contributed to consistent underinvestment.”
The Pensions Regulator
With little or no incentive to improve the quality of their back office functions – and thus the service delivered to their ‘captive’ customer base – many pension providers seem simply to have let things drift and failed to keep pace with technological or regulatory progress.
The words ‘pensions administration’ hardly set the pulses racing, and the administration function has often been seen by industry practitioners as little more than an afterthought. As the Pensions Regulator (TPR) noted in its market oversight report last year, “the perception of administration as a low-margin and low-value function has long contributed to consistent underinvestment”.
Raising standards in pensions administration
The Department for Work and Pensions (DWP), in its consultation paper on pensions governance published at the end of last year, pointed out that “there are no minimum standards for those administering pensions”.
It also noted that, although the Pensions Administration Standards Association (PASA) offers voluntary accreditation to around 80 members, only 14 had chosen to be accredited. In any case, the PASA standards provide “best practice standards, rather than minimum standards that administrators must follow”.
The need for better administration has been evident for some time. And since the industry’s approach to improvement has been, at best, piecemeal, it’s increasingly clear that regulators and policymakers are willing to impose change. This could (and arguably should) mean that third-party pension administrators, hitherto somewhere in a regulatory no-man’s land, are brought entirely under the remit of TPR.
“If we can get the nuts and bolts of administration right (as some already are), the potential benefits are enormous.”
Rory Murphy
In this area, as elsewhere in the pensions sector, frustration with poor practice is intensified by the awareness that some administrators are doing a great job.
Improving the customer experience
I’ve recently returned from a trip to Aptia’s Mumbai office in India, and witnessed first-hand a real desire, not just by the senior leadership team, but arguably more importantly by the staff on the ground. Their commitment to the scheme member was palpable, and seeking to put all their staff through Pensions Management Institute training is a potential game-changer.
Several administrators are similarly investing in staff training, technological upgrades and more effective use of artificial intelligence and, as a result, are not only providing a better service to funds and members, but are also managing to turn a healthy profit.
The key, as both the DWP and TPR have recognised, is to extend this positive and innovative approach to all administrators. If they can make a good living from it, all well and good. But the most important impact would be in enabling pension funds to deliver a better customer experience for millions of pension savers and beneficiaries.
A pension system that is used, trusted and appreciated by consumers is not just a pipe dream. If we can get the nuts and bolts of administration right (as some already are), the potential benefits are enormous – both to the pensions industry and to wider society in the form of better retirement outcomes.
Rory Murphy is a pension scheme trustee and chair, and the former chair of the Merchant Navy Officers’ Pension Fund.
