Despite the myriad changes that have taken place in the European pensions industry over the last half-decade, as a whole, pension funds still have a reputation for sticking to old-fashioned working practices. But in reality, many have woken up to the benefits that new technology can bring.
Not only can laborious processes be streamlined, but good IT systems can improve trustees or managers’ control over assets and enable them communicate directly with scheme members.
Reviewing and implementing technology can be a daunting process for pension funds. They fear the period of upheaval, and worry that they may choose the wrong provider. Do funds that have already made technological changes have any words of advice for those considering making a move?
When implementing a new system, the final choice of provider is of crucial importance says Anne Turley, operations group manager at the West Yorkshire Pension Fund. The UK local authority pension fund went live with its new EDM and workflow system, supplied by Comino, in February.
“We were looking for as much functionality as possible in line with the way we work,” she says. As a local authority pension fund, the organisation went through the official tendering procedure, advertising in the European Journal. This resulted in 40 expressions of interest, from which they invited three suppliers to submit a detailed proposal. Of these, two were invited to visit the fund to give presentations.
The choice was made on functionality and the ease with which the system could work with the existing pensions administration system, she says.
In practice, there was a period of disruption when the new system was implemented. Due to various constraints, a very tight timescale of just three weeks was allocated for the changeover.
Although there were good reasons for this quick changeover, ideally, a longer period would have been easier. “If we’d had longer, we might have spent some time getting some paper filmed,” says Turley. Because there was no time for this, staff were left with a backlog of paper which they had to deal with. If this had been filmed, the team would have had more of a clean start, she says.
However, Turley says all parties including Comino did very well in actually meeting the deadline. And afterwards, people at the fund picked up how to use the system very quickly. Comino gave staff training on the new technology, but the real test is always when the system actually goes live, she says.
The training given to staff should always be an important consideration for pension funds when awarding a contract for a new system, she says.
The pension fund saw the implementation of the system as a chance to simultaneously re-evaluate the way they work. Turley says: “We thought that merely configuring the system to allow us to work in the same way as before would have been a huge missed opportunity. They new system gave us the opportunity to re-examine all our business processes. The Comino system has ushered in a new way of working and we are already enjoying gains in efficiency and productivity.”
This was a big side benefit. “Often it’s all too easy to remain with what you have. You tend to stick to the old tried and tested method,” she says, even though this may not be the most efficient.
Before the Comino system, the team used to use the Heywood task management system that came with the administration system. “We took the opportunity to rationalise the process we had,” she says.
The authority fund is planning some future developments for the system. They plan to implement a COLD (computer output to laser disc) interface that will allow images of outgoing documentation to be stored directly into the system after it has been generated. It is also looking at the different ways of getting the remaining back-file scanned into the system.
“We have adopted bar coding technology so that the barcodes on outgoing correspondence will enable the automatic indexing of most returning documents,” says David Robertson, IT & special projects manager at WYPF.
Many pension funds now have their own website which allows them to communicate with scheme members. Anthony Hodges Consultants (AHC) has set up websites for many pension schemes, including Unilever and the Universities Superannuation Scheme.
Jane Snowden, communications consultant at AHC, says setting up a website does not have to be difficult at all. “A few years ago when technology was new to pension schemes, there was a lot of concern that it would be costly and difficult to maintain. But gradually as the web has become a way of life… the misconception has gone away.”
Since AHC not only sets up but also hosts the websites, she says there is no learning curve for staff at the pension scheme to go through, and no equipment to be bought.
Having a website for member information has many advantages, she says. As opposed to producing an information booklet for members, with a website it is not necessary to decide at the outset on a fixed number of pages needed. “It’s an evolutionary process. You can start with two pages but increase this as necessary,” says Snowden. “It’s not as limiting as old technology.”
Some features of the sites simplify concepts for members that can be very hard to explain in other ways. For instance, modelling tools enable members to see immediately what their benefits will be under certain options.
“They don’t need to know the maths. It can bring the subject matter alive in a way that you can’t in print,” says Snowden. There are other features that can be added once a website is established, including online transactional processes, initiating the retirement process and informing the scheme of changed status or address.
Jonathan Papier, head of pension administration business in the UK at Hewitt Bacon & Woodrow, agrees that many pension schemes do not realise how widely the internet is used by their members. “In our experience, we find particularly trustees of blue-collar staff don’t appreciate the general usage of the internet by their members.”
Hewitt Bacon & Woodrow’s own website system – called YBR or Your Benefits Resource system – has been implemented by seven pension clients over the last two years. The website is not a static collection of information, he says. Scheme members can get to a space that is personalised for them, where they then can get straight to their data.
“We are also finding trustees and management at pension funds want access to data,” via the internet, says Papier. “Having it online allows them to get it more quickly and to get in the format they want,” he says. The consultancy is currently developing software for management information online and workflow online.
Mn Services, one of the biggest pension fund managers in the Netherlands, has just gone live with a new investment management system. The system, SimCorp Dimension, handles all portfolios and funds and supports Mn Services’ front, middle and back office operations.
Like the West Yorkshire Pension Fund’s experience, Mn also found there were side benefits of the IT exercise. Roelf Pater, director of asset management at Mn Services says: “In fact, during the implementation period, the close working relationship between Mn Services and SimCorp even enabled us to address issues outside the scope of the initial project.”
Mn’s search for new technology began in 2001. At that time, Mn was just looking for a new derivatives information system. The system in use, says Pater, was spreadsheet based and depended to a large degree on individual employees. After this decision had been made, a demand list was formulated, a long-list was set up and presentations by vendors and on-site visits took place. This first phase resulted in a short-list being formulated.
The project grew. That summer, the management team decided to include the back office functionalities into the search as well. For several reasons, at the end of the year, the organisation was looking for a full-solution package, with all types of security checks and functionalities for both the front, back- and mid-office departments.
As it turned out, the SimCorp system was able to handle all its derivatives and met all Mn’s needs, except Dutch private loans. The implementation project started at the end of February 2002.
Parallel running started in September. After the first irregularities showed up, the parallel running was abandoned, and Mn gave themselves a couple of weeks to solve the majority of the problems. At the end of October parallel running was resumed and the attention was focused on reporting. On the first of January 2003 the SimCorp system was leading, and the old system was only used for year-end work.
Pater says Mn Services is satisfied with the way the project went, even though the way it was done deviated from usual theory.
“Apart from the project leader, we did not form an implementation team,” he says. “A group like this mostly consists of employees who are fully dedicated to the project. We did not have the resources to do so.
“One of the advantages of our approach is that more people within the organisation are involved. The system will be embedded better in the whole organisation. It also means that a lot of effort has to be put into the internal communication about the project. Everybody needs to know about the status, the difficulties and the planning.”
The major improvement for Mn Services are the user-friendliness (windows-based), better reporting facilities, more straight-through-processing, better and more interfaces and the ability to support our strategy for increasing their client base, says Pater.