On the go: The Pensions Administration Standards Association has released guidance to tackle “increasing” concerns about the transfer of administration services, citing delays, unreasonable charges and deteriorating performance during the notice period.
The new guidance saw the review and reproduction of PASA’s existing code of conduct on administration provider transfers “to bring these issues to the forefront of our members’ and the industry’s minds when transferring administration”, PASA chair Kim Gubler said.
The code, which all PASA members are obliged to sign up to, sets out a framework that makes clear the “responsibilities and accountabilities” of administrators, with the goal of limiting the potential for delays.
“The smooth transfer of administration will be a key focus for PASA in the coming years,” Gubler said.
The new guidance explains that transitions between administration services providers should be managed in the interests of the trustees and scheme members, and with a view to ensuring that the transfer is not unnecessarily delayed or frustrated, and that service to pension savers is maintained.
It covers the proper procedures for contract termination, and the formation of exit agreements. The latter should establish clarity on the terms of exit, including how data will be managed and transferred, on the scope of services covered, and what fees, charges and rates of same are applied.
“Once an exit agreement has been agreed and signed, a transition plan or project initiation document detailing actions and timescales can be drafted by the newly appointed administrator,” the guidance explains.
“This should be agreed between all stakeholders — the ceding administrator, the trustees and the newly appointed administrator. It’s recognised that any exit charges will be dependent on the size and complexity of the scheme, and other schemes specifics which may influence the amount of work involved in provision of the transition to another provider.”
The guidance also lays out the steps administrators and trustees should take “immediately” to account for changes to the code that are scheduled to come into force from January 2023.
Two points will be added: the first states that, for new administration appointments, the contract should include a clause setting out the terms in the event of a subsequent transfer of services; while the second states that, for existing contracts, administrators should have a “clearly stated policy on transferring schemes to a newly appointed administrator which can be followed when existing contracts are silent on the issue. This policy should be available to trustees on request”.
The guidance explains that trustees should review their administration contracts to ensure they are clear on the terms of termination. Where no exit clause exists, they should consider introducing one, or request a copy of their administrator’s policy for transferring scheme administration.
Administrators themselves are told to review, or otherwise put in place “a clearly stated policy on transferring schemes to a newly appointed administrator”, which should be provided to trustees where no exit clause is in place and available to them on request “as a commitment to best practice on transferring administration services”, the guidance states.
Robert Wakefield, PASA’s exit agreement working group chair, said: “A change of pensions administration provider should be managed in a professional manner between the administrators to ensure the interests of the trustees and the scheme members remain paramount, the transfer isn’t unnecessarily delayed, frustrated or rendered ineffective, and, crucially, service to pension savers is maintained.
“We’re encouraging trustees to be proactive and check their current contract to determine if there are contractually agreed terms on exit (an exit agreement). Recent agreements are more likely to include a clause on exit, but it’s common for these to be missing from older contracts.”
Wakefield continued: “The guidance includes a template exit agreement which can be used as a schedule to an existing administration contract, a schedule within a new administration contract, or as a checklist for trustees and administrators to check their own exit agreement includes all recommended aspects.
“This document is designed to support trustees, administrators and scheme managers to plan and manage a transition, ensuring a smooth handover and to troubleshoot solutions where stumbling blocks are encountered.”
