Paradise gained: unlocking the potential of pensions administration transitions

Paradise gained: unlocking the potential of pensions administration transitions

At the recent Pensions Administration Standards Association conference, I attended a talk from distinguished industry professionals on the challenges and pitfalls of pensions administration transitions. The talk was titled “Administration Transition: Highway to Hell?” After reflecting on the discussion, I came away feeling not only that the title did not reflect my experience, but also that it doesn’t fully illustrate the benefits and advantages that can be derived from changing administrator. For me, a more fitting title, inspired by Paradise Lost, might be: “Long is the way and hard, that out of hell leads up to light.” For me, this quote captures why most trustees decide to embark on an administration transition journey.

The speakers at the conference rightly emphasised the common challenges faced during an administration transition. Issues such as poor data quality, strained cooperation between the departing and incoming parties, and difficult and expensive exit terms were discussed. However, I believe that some key benefits of these transitions were overlooked. Here are three compelling advantages that I hope offer a different perspective on the debate:

Embracing change to provoke improvement

Administration transitions often lead to the most in-depth analyses and investigations at an operational level a pension scheme will ever undergo. The standards, approaches, and practices involved in high-quality administration transitions ensure that every aspect of pension scheme administration is scrutinised. This includes data, benefit specifications, communications, past cases, and processes. Although the process is far from easy, it is undeniably valuable. Over the past decade, transitions have significantly improved the quality, control, and overall administrative standards and practices of pension schemes.

While buy-out is often cited as the gold standard for data quality and benefit analysis, high-quality administration transitions now regularly follow these processes. They apply the same level of analysis and scrutiny to scheme rules and data, working with expert partners to establish a fully documented operational basis for schemes. The process may be complex, time-consuming, and occasionally delayed, but the old adage holds true: “no pain, no gain.”

Realising the value of data

One of the biggest challenges our industry faces is quantifying the value of data. Without defined data cleanse objectives, questions arise around the value of having clean data and who the true beneficiaries are. Good data is crucial, but its impact and significance are not always clear. This is one reason why buy-out and buy-in quality data is highly sought after – the value of the data is more evident.

Data sets are often large, dynamic, and difficult to manage, with unclear objectives for improvement. A high-quality transition can change that. Transitions now set very clear objectives and measures of quality, bringing data into sharp focus. This is often the driving force behind administrator-to-administrator changes. Data is used to achieve targeted levels of automation, self-service, or an agreed buy-out timetable, making the value of data more tangible and accessible.

Improved member and trustee experience

Administration transitions are never accidental. They are motivated by the need to improve the member experience and, increasingly, project support. Transitions introduce new technology, enhanced processes, and improved communications that immediately benefit members, trustees and scheme sponsors. These outcomes must not be overlooked and should be considered the foundation for future service.

While pensions administration transitions undoubtedly present challenges and complexities, it is crucial to acknowledge the significant benefits they can yield. By embracing change, realising the value of data, and improving the experience for members and trustees, these transitions offer a path toward progress and enhanced standards of pension scheme administration. The journey may be long and arduous, but the light at the end of the tunnel makes the effort worthwhile. As trustees embark on administration transition journeys, they should remember the quote from Paradise Lost, “Long is the way and hard, that out of hell leads up to light”, for it is through overcoming these obstacles that they can ultimately achieve higher standards and secure better outcomes for all stakeholders.