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UK roundup: Alliance Boots, Berkshire, Hewitt

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  • UK roundup: Alliance Boots, Berkshire, Hewitt

UK - Alliance Boots has confirmed it will close its defined benefit (DB) schemes and switch to a new defined contribution (DC) arrangement, while the Royal County of Berkshire Pension Fund is seeking a provider for pensions administration software.

Meanwhile, Hewitt Associates has revealed scheme changes are driving pension administration strategy, including a need to get more for your money.

Alliance Boots will close its two existing DB schemes to future accrual for active members from 1 July 2010 and will replace them with a new DC scheme.

The move follows an "extensive consultation process with employees" that was initiated in January. At the time Alliance Boots claimed closing the two DB schemes - the Boots Pension Scheme and the Alliance UniChem UK Group Pension Scheme - in favour of DC provision would "provide competitive pension benefits for all employees of its UK businesses on a more sustainable basis". (See earlier IPE article: Boots mulls replacing risk-averse DB pension with DC)

Alliance Boots noted the new DC scheme would also be implemented from 1 July, although it said there were "a number of significant enhancements to that [DC scheme] originally proposed".

The two DB schemes currently adopt a conservative investment strategy, with the larger Boots Pension Scheme holding 15% in equity and property, and the remainder in bonds. At the end of March 2009 the financial statements showed the two schemes had combined assets of £3.5bn (€4.1bn), resulting in a surplus of £188m.

The Royal Borough of Windsor and Maidenhead (RBWM) has initiated a search for a provider of pension administration software for the Royal County of Berkshire Pension Fund.

The tender is a routine market testing exercise ahead of the expiry of the existing contract held with Heywoods. The successful applicant will provide the pension scheme with services such as pensions payroll, member and employer access via the internet, and pensions administration integrated with payroll systems.

RBWM is offering a contract for an initial period of five years, with the option of a further five-year extension. The closing date for applicants is 19 July 2010 and further information can be obtained from the council. 

Findings from Hewitt Associates' second annual pension administration survey highlighted five key themes including a move towards more outsourcing and that scheme closures are driving changes to administration strategy.

The survey of 97 UK scheme managers of both DB and DC schemes showed administrators are also under increasing pressure to do more for less money, with 79% of pension managers and 58% of trustees concerned about reducing costs. But at the same time there is an increasing desire to improve service quality and accuracy through techniques such as data cleansing, an issue that is a priority for 59% of pension managers and 43% of trustees.

Ian Terry, pension administration business development manager, at Hewitt Associates, said: "As the economic downturn has forced companies to tighten their belts, our research clearly shows this has also been felt by pension schemes. Many remain faced with what may appear to be an impossible task: to reduce costs while improving quality."

Terry suggested the traditional approach to scheme administration would not enable schemes to meet these demands. Over the past six to 12 months, the consultancy has seen a "much higher volume of schemes implementing a market review of existing arrangements or considering outsourcing for the first time", he said.

The survey showed that 63% of all respondents outsource their administration to a third party, while 30% attributed the closure of the pension scheme to future accrual as the main reason for changing the outsourcing strategy.

Terry said: "Outsourcing is increasingly becoming the preferred option for pension administration, as long as the strategy is well defined and correctly implemented. Choosing the right third party provider is therefore becoming increasingly important.

"Nearly 60% of participants said they now saw an opportunity to cover all pension functions within a single outsourced solution, providing the four core services of actuarial, administration, investment and pension management."

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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