The Pensions Regulator’s Gaucho Rasmussen highlights the watchdog’s emphasis on administration standards and urges trustees to put this to the top of agendas.
Early on in my career I cut my teeth as a lawyer at a large national supermarket retailer. One of the key learnings from that time was the central importance of knowing your ‘PQRS’: price, quality, range, and service proposition.
This expresses the idea that price is not the only dimension by which a retailer can distinguish themselves and attract customers. If retailers don’t get the balance right, they know their customers will vote with their feet and take their business to a competitor.
In workplace pensions, members can’t as easily vote with their feet. An employer picks their pension, and for most, defaults guide decisions.
So, as a regulator, we are making sure value and service don’t get forgotten.
Areas of focus in the next decade
The entities that will thrive in the new pensions landscape of the next 10 years will be those that don’t just deliver strong investment outcomes, but also raise the standards of customer service.
Administration and service levels must move to the forefront of our and trustees’ considerations, regardless of scheme type or size.
In the defined contribution pensions world, the forthcoming Value for Money framework clarifies that expectation. More broadly, pensions dashboards requirements will catalyse this shift and open up a new level of transparency.
Both of these initiatives will be backed by a regulatory approach that makes sure investment governance and good administration are at the forefront of all trustees’ minds.
Administration requires attention and investment
Members of pension schemes not only expect their money to be invested well. They also expect that the right amount is invested, that their details are correct and secure, and that they are supported when they engage.
This is a minimum expectation, yet too many schemes still hold some form of non-digital data and need to improve their accuracy.
Recent failures in administration within public sector schemes are an important warning sign – and the lessons here are relevant to all workplace schemes.
Traditionally, administration has suffered from underinvestment and a culture that accepted a race to the bottom on cost. As acknowledged by the Department for Work and Pensions’ recent consultation on trusteeship, governance and administration, that has to change.
My message to trustees on this is simple: you are accountable. The buck stops with you, even if your scheme relies on administration services provided by a third party.
Invest in good quality administration and see administrators as a strategic partner, challenging your administrators to demonstrate and articulate value in terms of outcomes rather than outputs.
TPR’s evolving expectations
At the end of last year, we reset our expectations of administration in new guidance, with practical steps for governing bodies to take to ensure high-quality administration is delivered. Whether through regulatory initiatives on dashboards, or our wider market oversight approach, you will see a real and tangible focus from us in this area going forward.
We are entering an era marked by a great deal of change, with the expectations of schemes and trustees evolving. Those that thrive in the future will recognise that returns and services are essential to good member outcomes.
As a regulator, we will be clear on what excellence looks like and encourage it. But also step in before harms occur in a proactive and proportionate way.
And if we succeed, together we will be able to look back and say that, thanks to our combined efforts, millions of people feel their savings are safe, and can expect a secure, comfortable, and contented retirement.
Gaucho Rasmussen is executive director for enforcement and executive general counsel at the Pensions Regulator.
