Trustees are usually pretty reasonable in their requests to administrators: They want the right benefits paid to the right person at the right time. That is not too much to ask, is it?
During a procurement process, trustees might make a few more requests they believe will make the scheme more efficient.
We need to create a true partnership; a joint venture between trustees and administrators
For example, a request for 100 per cent automation of member calculations was put forward to me recently, as were online transfer-out quotations (and possibly settlements) and integration with an actuarial valuation system that provides online modelling in real-time.
It will not be long before requests including integrated robo-advice or blockchain-based straight-through-processing with a preferred asset manager become more run-of-the-mill. Requests can often escalate swiftly during a procurement process.
However, the discussion can quickly break down when costs come into play. Most trustees believe their data is good, the benefit structure straightforward and any automation costs should be at the lower end of the scale.
Business is often placed with administrators that quote cheaper (if not the cheapest) transition and annual costs. Many trustees find it difficult to understand why cleaning their data is so expensive, which leads to a disconnect between services expected and a willingness to pay for these services.
Better data quality solves many problems
It was in the early days of computing that the term ‘GIGO’ was coined. It stands for ‘garbage in, garbage out’.
If the raw data is flawed (garbage in), how can we expect member calculations to be accurate, valuations to be dependable, or buy-out providers to offer a good price for underwriting liabilities?
In fact, if member data is not digitised and clean, it would be seen as almost irresponsible governance from both the Pensions Regulator’s perspective, as well as under the General Data Protection Regulation.
With flawed data, it is near impossible for administrators to speed up turnaround times, automate transfer-out calculations or offer retirement settlements online in real-time.
Administrators live in a reality where they need to speed read what can sometimes be hundreds of pages of background documents, identify any special arrangements a member may have, any transfer-ins, or indeed any transfer-outs, merely to complete a single case.
They then need to review and sometimes manually work through a highly complex benefit calculation, delivering what is essentially a one-off pension consulting service at a very slim operating margin.
Administrators and trustees must work together
To beat the scourge of GIGO we need to work towards a new deal. We need to create a true partnership; a joint venture between trustees and administrators focusing on a high-quality member experience, while managing costs and delivery expectations.
The foundation of this partnership is very simple: high-quality data. Automated calculations, instant quotations, online settlements, real-time valuation systems and even the pensions dashboard will be straightforward to deliver after that.
Girish Menezes is a board director of the Pensions Administration Standards Association and the head of administration at Premier Pensions
