Pension funds have generally been late starters compared with organisations in other industries in using technology to help them meet their objectives. But now computer applications are an integral part of how funds manage their operations, and a number of funds are also finding innovative ways of using the internet to improve the services they offer to their members.
As one of the largest electronics firms in the UK, Toshiba Information Systems UK, based in Weybridge, Surrey and employing 800 people, is keen to make use of technology to improve the conditions and benefits it offers staff.
“We were experiencing escalating costs in our pension administration,” says Susan Stevens, human resources manager at Toshiba. The company outsources its pension fund administration to London-based Gissings, which charged the company according to the number of enquiries from employees. With employee concern about the performance of their pensions leading to an increase in the number of enquiries, Toshiba looked for a tool it could give employees to find the answers to pension queries without having to call the administrator, says Stevens. Toshiba already had a policy of encouraging self-service on the part of employees in dealing with other human resources issues, and had already put its payslips and benefits packages online.
To extend this to the pensions area, Toshiba developed a link between its internal network, or intranet, and Gissings’ hosted administration system that now enables employees, via the web, to access their individual accounts, as well as tools that help them make decisions on how their pension money is invested. Using a unique user name and password, employees can log onto the administration system and view their contributions. They can also look at performance data on the choice of 12 funds, from low to high risk, that Toshiba offers to its contributors. In addition, the web site includes an application whereby employees can explore what-if scenarios for increasing their contributions, with new projections of pension income produced in seconds.
“With this initiative we are demystifying the pensions process for our employees, giving them instant access to all the information they need to make the best decisions with the direction of their pension contributions,” says Stevens. “And as well as benefiting staff, the service is hugely valuable to Toshiba, providing simpler, more cost-effective administrations and improved communication with scheme members.”
The next phase will be to offer employees the ability to shift their money from one fund to another online, but that will only be introduced once the system beds down and is probably six months or so away, says Stevens.
Toshiba is one among five funds that has already gone live with a web-based interface to Gissings pension administration system, with another five in the process of developing their connections, says Gissings. Using the internet to give members easier access to information about their pensions and a greater degree of control over where their money is invested is a growing trend in the industry – see box text on APT. Trailblazer for this approach has been Sweden’s Premium Pension Authority (PPM), which administers the government’s premium pension - the fund-based part of Sweden’s pension system, made up of contributions of 2.5% of earned income of wage earners, and over which wage earners have control of investment.
To manage the premium pension, PPM built an administration system that can handle all the transactions in over 5m accounts, including switching funds, investing new money and paying out pensions. The organisation claims that it is one of the world’s largest computer systems for unit-linked insurance and it can handle up to 700,000 fund switches per day. When the system went live in autumn 2000, 4.4m pension savers were given the opportunity to invest a total of Swedish Krona 56bn (E6.1bn) and 65% took up the option.
Since then, more than 100,000 pension savers join the scheme each year, but because new members are generally younger than those who were initially part of the scheme, and because of the fall in the stock markets, in the last few years there was less use of the system to exercise choice, says Kerstin Svanberg, a spokeswoman for PPM, although that has begun to change in the last six months with more online activity by pension contributors.
But whether using the internet in innovative ways to communicate with and provide services to members, or running more conventional applications for administration, accounting and so on, a pension fund needs to keep a watching eye on technology and to deal with it in a systematic way. Dutch healthcare and social workers pension fund PGGM, which has around E45bn in pension assets, has an information policy that sets the direction for future software and infrastructure development based on an annual review of the business plans of the units within the fund and the applications they have in place.
Where new technology requirements are identified, a project is initiated that begins with the design of the system’s architecture in terms of the logical processes, the technical requirements and the infrastructure required to support these. The existing environment is then checked to see what opportunities there may be for optimising existing facilities before new development begins.
One of the problems that can bedevil pension funds, especially larger funds, is that over the years they can acquire a number of different systems each specialised to a different task, but which become unwieldy and costly to maintain because the range of skills that are required, problems with dealing with a number of suppliers, etc. Furthermore, several systems might include the same function, so there is wasteful duplication, while data format and communication protocol differences make it difficult to link the systems for efficiency, sharing information and so on. To help overcome many of these problems, PGGM has recently moved to a Microsoft based platform for its technology.
“The board feels that IT is essential for the performance of PGGM, therefore it is always taken into account [when planning future_strategies], and it is promoted by the personal interest in IT by several of the directors,” says Wim Walter, director of information and facilities services at PGGM.

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