Although there’s been such a lot of emphasis on value for money, it’s such an intangible concept. 

When it comes to going on holiday, some people search the internet for the cheapest flights, book hotels direct for the best deal and eat in little out of the way places for next to nothing. Others wouldn’t dream of anything but booking an all-inclusive 5-star experience. Both types are looking for value for money but achieve it in very different ways and no one can say which is ‘better’. It’s for them to judge. Pension administration is no different.

PASA does not define what value should look like because when it comes to running a pension scheme, what’s value for money for one board of trustees can be completely different for another. It comes down to what the trustees want to achieve for their members. 

Trustees of DC schemes have a legal obligation to assess value and how this impacts on member outcomes. The obligation to assess DC administration is a part of the wider picture and the current focus is on the value gained by members from their investments. When it comes to value in DB schemes, this is still very much within the overall trustee governance framework and the focus has often centred around price. 

Whether it’s open or closed, DB or DC, the real driver on how much administration costs is whether the data is any good. With good data, even a closed DB scheme can offer online access to members. Membership can be sliced and diced so any messaging is targeted. Good data can even support the employer in getting the best price from any de-risking exercises. Just because a scheme is small and/or closed it doesn’t mean the members can’t receive a first-class service.  

Before looking at what the administration is costing, trustees need to assess what they want to achieve and what they receive for their fees. 

If it’s a DB scheme which is closed to new members, then the trustees might want to ensure there’s no disturbance and the scheme is run on a ‘care and maintenance’ basis. The basic administration tasks need to be as efficient as possible, so when members reach a life event it is handled smoothly and effectively.

Perhaps money spent on getting the data up to scratch will be worthwhile here? If the trustees are lucky enough to be running an open DB scheme, they may be looking for more ‘added value’ services such as bespoke member communication. Trustees of an occupational DC scheme might be looking for a light touch basic service, or something as interactive and ‘sexy’ as any contract scheme.  

Regardless of whether its in-house or outsourced, trustees need to know what they want to achieve to be able to assess value. It may be the data has to be clean to support a de-risking, or to engage the membership through greater communication. While both need clean data, the way its used and the value trustees derive is different. Its only when trustees know what they want from their administrator, both in terms of scheme strategy and member services, that they can assess if their administrator delivers value for money. 

The PASA standards have been designed to encompass the range of activities carried out AND accommodate different ways these can be achieved. There are key tasks to any pensions administration service, membership records need to be implemented and maintained securely (including managing contributions for open schemes), benefits need to be calculated and advised accurately, pensions need to be paid and increased in accordance with the Rules.

Other key scheme stakeholders need to be liaised with and, of course, there’s all the Regulatory reporting to be done.  In order for trustees to know if these tasks are taking place when they should, the administrator must provide clear reporting – and trustees should take a close interest in what is reported. Meeting the administrator on a regular basis to discuss any issues or suggestions for improvements is also vital. The first step for any trustee looking to judge value is to look at the PASA standards for what all administrators should deliver. Then add in what is specific to their own needs.