Where has the pride gone?
If service was poor to begin with, it’s very likely things are only going to get worse in the short term when trustees serve notice on their existing provider. I am sure many pension administrators have experienced “pens down” instructions from the top when business is lost. All without a thought for the poor member due to retire next month. And what’s more, it is likely that the provider may then attempt to charge an exorbitant amount to release membership data, keeping trustees to ransom until they have no option but to pay up.
This problem is much worse for smaller schemes who can sometimes be viewed as a little fish in a big pond, struggling to get the professional attention they equally deserve. As a business who specialises in small-to-medium-sized schemes, we have seen some shocking outcomes when taking on new clients.
We need to ask ourselves one important question: where has the pride gone from our industry?
We need to remember that there are real people behind all of this; members should not suffer because of poor service.
Service which trustees have had the pleasure of paying for.
Low cost, low frills doesn’t work for pensions
Though bad service is often at the top of the list, fees can also be a reason why trustees look to change providers. Most often the switch comes from a cost-minimisation exercise. Whilst I totally agree with the need to reduce expenditure by improving processes and finding efficiencies, getting value for money is a must.
But buyer beware. Will minimising costs also minimise value?
Low-cost/no-frills airlines are a great example of cost minimisation. However, pension plans cannot operate on this type of business model. An ‘as brief as possible’ flight on a budget plane is a whole different ball game to receiving an incorrect pension that you’d saved for your entire working life.
In some circumstances, you pay for what you get. With the increasing buy-in and buy-out market opportunities, poor administration will, come back to haunt trustees. The costs are simply delayed. All insurers perform due diligence to check that benefits have been administered in accordance with Trust Deed & Rules. If they’re not up to scratch, there’ll be additional costs to rectify them.
The trend in the market to switch administration providers is growing as trustees seek out those who have experience and a good reputation of de-risking schemes. This ensures that data and benefits are corrected, complete and accurate before going to market. And in this way schemes can benefit from preferential pricing terms.
One final issue that must stop is trustees being held to ransom over exit fees.
PASA to the rescue
At last, the industry has stepped up to address these issues.
PASA has come to the rescue with its Code of Conduct on Administration Provider Transfers, which all corporate PASA members must sign up for as a condition of membership. This is a much welcome move and I urge ever administrator to take the time to read and carefully absorb its content, so that we as an industry do not lose sight of the members.
The proof is now in the pudding, but I hope that we Third Party Administrators are all capable of working, not only to this Code of Conduct, but together, to resolve any difficulties and ensure much smoother transitions in the future.
Julie Yates, Director of Pension Administration, Cartwright
