The Pensions Regulator (TPR) is planning on establishing a closer relationship with administrators of UK opension schemes as “new policy initiatives such as Pensions Dashboards and value for money, and unforeseen challenges like COVID and cyber leaks, have once again put the importance of good administration back in the spotlight”.

In a blog post on TPR’s website, Cliodhna Judge, interim head of relationship supervision, front line regulation, said: “Pension scheme trustees are the first line of defence for savers. That’s why driving up standards of governance and administration in pension schemes is central to our work and vital to ensure savers receive the pensions they are due.”

She said TPR is innovating by using its supervision approach to establish open, two-way relationships with several “strategically important” pension administrators to understand the challenges and tackle the risks.

She also noted that good quality data was the “bedrock” for a well-run pension scheme and that improving accuracy of annual benefit statements, valuations and membership data was crucial and in line with the expectations of both the regulator and trustees.

“Administrators are integral to this, which is why we are determined to find out more about how trustees interact with administrators, and what barriers currently exist,” Judge continued.

Gavin Giles, head of pensions administration at consultancy Broadstone, said: “Improving dialogue between administrators and trustees drives up standards of scheme governance which is crucial for acting as a first line of defence for members as well as enhancing data quality, engagement and dashboard readiness.

“We are glad that the regulator is banging the drum for administrators. Poor administration is a danger to member outcomes and the reputation of the industry so we must do all we can to ensure the highest standards are upheld across the industry.”

Administrator relationships pilot

In January 2022, the regulator created its first administrator relationships function – a team dedicated to engaging directly with third-party pension administrators to extend TPR’s reach and influence.

“Initially, we undertook a pilot with a voluntary administrator to explore potential risk areas and the level of burden this approach could have,” Judge said.

Cliodhna Judge at TPR

Cliodhna Judge at TPR

The engagement was perceived as being mutually beneficial, and the pilot administrator received a report on areas to consider for business change. These included enhancing internal checking processes, recognising the need for a clear IT and technology plan (including the exploration of digital verification practices), and developing better communications.

The pilot administrator took these considerations into account, helping to improve the quality of its services to savers, she noted.

She added: “The feedback we received from the administrator was very positive. It was clear the approach was seen as productive and collaborative, and not simply a tick box exercise.”

TPR gained a better understanding of current market challenges in more detail, enabling more visibility of administration risk, Judge said, and the regulator has been able to embed the lessons from the pilot into the ongoing design of the administrator relationships initiative.

Following the pilot, TPR started exploring a wider set of focus areas with further third-party administrators, further improving its industry knowledge and respond to emerging issues.

The regulator is now focusing on systems and processes; data quality; trustee focus, understanding and willingness to pay; member engagement and communication; and pension dashboard readiness.

Thanks to the initiative, TPR is now proactively engaging with third-party pension administrators on a voluntary basis.

Judge said: “We’re tackling the risks of poor administration, driving up standards, promoting best practice (or identifying areas where guidance would support standards) and learning more about the core challenges and issues third-party pension administrators handle on a regular basis. These include responses to cyber security incidents, resourcing issues, the recruitment and retention of a skilled workforce and the management of data quality.”

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