Pension admin costs amongst the UK’s largest pension schemes have fallen by an average of 2% per annum over the last 5 years. This is a conclusion from CEM’s annual pension administration benchmarking study. Many of the largest schemes domestically and globally submit detailed data to CEM in order to be compared.

Most of the participants are large. The UK funds alone have over 7 million members. Some are outsourced, others administered in-house. Most are well known.

There are significant commercial pressures on UK funds that don’t exist in every market. Too many third-party administrators chasing too few quality contracts means that prices are kept low. That is not the whole story though.

One of the great failures of the pension admin industry in the UK is its inability to articulate its value. When there is no measure of value, the focus invariably shifts to reducing costs. One of the problems then is how to change the focus from cost to value. In order to change the conversation, we need some measures of value.

It’s said that ‘good’ administration pays the right member the right amount at the right time. That’s what we should regard as a compliant service that fulfils the basic remit. It shouldn’t be the limit of our ambition though.

Neither should pensions admin be measured solely in terms of turnaround times. What gets measured gets managed, and if we focus too narrowly on meeting arbitrary deadlines (usually timelines that we decide are reasonable on the members’ behalf) then it’s possible to get fixated on hitting those targets to the exclusion of other, more relevant measures of success. It has the potential to drive sub-optimal behaviours.

The fact is that members of pension funds are acutely aware of good customer experience based on interactions with other service providers. For lots of members this means secure and easy omni-channel access to data and services, with elegant presentation, honed messaging and information that anticipates needs. It also means recognising the circumstances of different audiences, for example older or vulnerable members who might need more personal support at critical times.

CEM compares funds on member service using a sophisticated set of metrics across multiple channels. For us, higher service means more channels, faster turnaround, more availability, more choice, better content and higher quality across lots of different touch points. These metrics are distilled into a single overarching score for each scheme so that they can be compared. In our view, it’s OK to spend more if you are delivering more - and that means a higher service score and hence a better experience.

By looking at cost and member service together though a robust and diverse scorecard, we can start a really meaningful conversation with Boards around operational strategy. This means having a conversation about trade-offs between cost and service and helping all stakeholders to understand that pensions administration doesn’t have to be a race to the bottom. Providing a compliant service at low cost is a perfectly valid strategy but it needn’t be the limit of our ambitions. It’s equally OK to spend more to achieve more.