Jenny Monger discusses the value of proper transitioning in a pension scheme transformation process.

The process of changing pensions administrator is not always smooth. The challenges can include a lack of cooperation from the outgoing provider in sharing knowledge and providing data, and the time and cost of moving.

However, the perception is often worse than the reality.

In the pensions industry, we refer to the process of moving to a new provider as a "transition project". Transition is defined as "a change from one thing to the next; has a predictable and regular form".

Referring to a change of providers as a "transition" paints it as a regular, repeatable project (which it is – for administration providers at least!).

In contrast, transformation involves a more dramatic change, and its steps and outcomes are less predictable – a good example being having children.

A scheme transition is often motivated by the belief that the new provider will deliver some level of transformation and address any service issues that may exist. T

here is little point in going through the effort of a transition, if, once completed, the promised transformation does not materialise. But, can schemes guarantee that changing provider will meet their objectives?

In moving, three key phases will support these change objectives. Firstly, a successful transition will provide the base, then two transformation phases (standard and customised transformation) will take the client-specific operational environment to the agreed levels:

1. Transition phase: manage the risks

The transition phase covers the standard activities involved in taking over service delivery responsibility. Because the outcomes are not completely within the new provider's control, the key focus of this phase is the management of risk.

Trustees and clients should look to assess the provider's approach to, and experience of, risk management. This should include their project management methodologies, focussing on the key risks of knowledge transfer and data migration.

As no two transition projects are ever the same, the variety and flexibility of techniques that can be demonstrated is essential.

2. Standard transformation phase: assess needs and solutions

Most transition projects will have an agreed level of standard transformation to be realised when the service goes live. The focus of this phase is the assessment of the scheme-specific needs and the extent to which the new existing operational environment will meet them.

This may identify areas of change; for example, changes to standard communications, processes or guidance notes that may be required to meet a specific scheme design or requirement. This is the value-added element of any transition project, and whilst the amount of change needed may vary from scheme to scheme, the assessment should always happen, as scheme requirements always differ.

Trustees and clients should ensure that the transition project plan delivers this analysis and allows for those activities that are needed to meet the agreed solution for a go-live steady state.

3. Customised transformation phase: establish continuous improvement

A customised transformation will involve scheme-specific technical projects, such as data-cleansing programmes, typically after the service goes live and is in a steady state.

For example, any deficiencies in the data would have been identified in the transition phase and the standard transformation analysis would have identified the impact of those deficiencies on the service in terms of risk and quality. Projects can then be prioritised and scoped to correct the data or improve the solutions to manage those deficiencies.

Trustees and sponsors should assess a providers' experience and ability to deliver transformational projects. The top three items on most agendas are:

• Data quality improvements
• GMP reconciliations
• Delivery of de-risking projects

Schemes looking for a new provider want to deliver transformation, but they initially focus on the transition phase, which is not intended to deliver that.

To ensure the right outcomes for the scheme and its members, trustees should assess the skills and ability of the new provider to deliver transformation both as part of the transition and as part of live operations.

This assessment of a provider's ability to deliver transformation is especially important in the current landscape where the increased demand for these skills has led to a capacity crunch, resulting in falling standards and extended project timelines.

In the pensions administration industry, a transformation is rarely as dramatic and instant as, say, dying your hair pink or getting a tattoo.

In our world, transformation is a set of controlled incremental projects, each aiming to deliver a new and improved steady state for members.

It is the ability of the new provider to establish, react and sustain change over the long term that enables a scheme to achieve its overall change objectives when making the move to a new provider.

Written by Jenny Monger, Business Design Manager, Trafalgar House.