A new cloud-based service promising independent data backup facilities for pension schemes has won praise from industry experts, who hailed it as an “innovative solution” to the rare but worrisome prospect of administrator failure.
Announced by Cosan on Thursday, the administration, resilience and mobility product, known as ARM, is designed to remove the risk of administration failure and data loss by keeping all files backed up on a cloud system, known as datastore.
The data itself is independent from the pensions consultancy, which does not have access to it.
In the event of a failure by an employer or a third-party administrator, ARM will be able to restore any lost data, enabling trustees to continue paying out pensions; while, for outsourced schemes, Cosan Consulting arranges a transition to a replacement administrator.
We can see this being attractive to trustees when reviewing or engaging with their administrators. Transition of data at the end of engagement is often raised as a concern and it can be a time-consuming process
David Brooks, Broadstone
Cosan’s datastore is the first such cloud-based data back-up service to be offered to UK pension schemes, the consultancy claimed. It will maintain membership and scheme information, which can be made available within 24 hours.
The data, which includes administration and payroll information, will be kept updated from the scheme’s existing administrator in order that, should an error or failure occur, no data will be at risk of being lost when the scheme transitions to a new administrator, speeding up what can otherwise be an expensive and convoluted process.
Philip Dickinson, a founding director of Cosan Consulting, said: “While our ARM solution is not a direct result of the pandemic, the past 12 months have shown that trustees need to have plans in place to ensure the resilience of the administration of their schemes should a crisis come along.
“We also believe that, in future, we are likely to see greater oversight in this area from industry regulators.”
ARM and Datastore have been designed to enable trustees to restore their scheme, its records and its payroll processes “within days”, he added.
“Critically, our service is totally independent and thus ensures that trustees are able to access the complete range of provider solutions that exist either on a temporary or longer-term basis.”
An ‘escrow-type’ insurance policy
Speaking to Pensions Expert, Dickinson explained that the service is intended to have broad applicability, “from an in-house run scheme suddenly finding it cannot access systems/premises/people due to an employer insolvency to a client wishing to change [third-party administrators], but not being able to access member data and scheme records in a timely way that supports an orderly transfer of responsibilities to the new provider”.
For those schemes wishing to sign up, Cosan will have to understand what type of scheme it is, what benefit design it has, what kind of membership, and also liaise with scheme trustees to find out what they want from a third-party administrator.
Despite this, Cosan will not itself have access to any of the data it secures on behalf of a pension scheme, due to it being an escrow-type insurance policy, Dickinson explained.
ARM is “designed to hold scheme set-up and member data. We do not have access to the data in the secure area — this is one of the key strengths of our solution,” he said.
“We do, however, offer some limited reporting capabilities, should the trustees need address/email listings to help them communicate with members at a time when their normal administration records are not available.”
Should the system be triggered, Cosan will “use our knowledge of the provider market to actively match our client with the right provider — clearly that provider has to have the capacity to undertake a transition”.
“We will also have a panel of payroll bureaus that can step in to continue to pay pensions in the short term. This process is not automated as it relies on our consultancy skills,” it said.
"However, as much of the data processes as possible, both in and out of the datastore, are designed to not have human intervention.”
Failure is rare but solutions are necessary
Broadstone technical director David Brooks told Pensions Expert he was a fan of the new offering, believing it to be a “really innovative solution”.
“We can see this being attractive to trustees when reviewing or engaging with their administrators. Transition of data at the end of engagement is often raised as a concern and it can be a time-consuming process,” he said.
Though administrator failure is “extremely rare” and a severe “breakdown in working relationships is also thankfully unusual [...] it is high on the list of concerns for trustees when they consider how their data is held both securely and in a way that allows for the efficient running of the scheme in these scenarios”, Brooks explained.
Administrators making use of the ARM system “will do much to alleviate those fears”, even if they never fully materialise, he continued.
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“The ARM system should give confidence to the trustees and demonstrates the confidence the administrators have in their processes. We look forward to seeing how the initiative develops.”
Girish Menezes, head of administration at Premier Pensions, seconded this appraisal, considering that the service “will be especially useful for in-house administrators that are concerned about sponsor resilience and buyout providers who require back-up commitments due to [Financial Conduct Authority] requirements”.
He said: “The service builds on current arrangements, such as the [Pensions Administration and Standards Association] guidelines to include exit commitments within contractual terms and recent efforts on the part of some trustees to run shadow payroll services to build redundancy within the pensioner payroll set-up.”
