Pension Funds Insider

Pension Funds Insider brings the latest pensions news and industry insights; from investment and governance updates to new mandate appointments and pensions regulatory information.

Will regulation improve pension administration standards?

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How does your pension administration compare within the universe of Artificial Intelligence, Biometrics and Block Chain? Would you say that the leverage of technology was rudimentary or fairly comprehensive? How would you even go about benchmarking it or mapping a path from where you are and where would you like to be? Would you be able to define your one, three and five year objectives?

Trustees, Pension Managers and Sponsors are split on this topic. Some do not really mind about the quality of technology, as long as the members are paid the right pension at the right time. Others care quite deeply and are willing to pay a premium for service turbo-charged by technology.

The Pensions Administration Standards Association has been considering these issues and the route from chalk-and-blackboard to robotics-and-biometrics. An important concept to keep in mind is that this is not merely a single-track progression of technology. A fully automated ecosphere requires multiple facets to succeed. Schemes should consider:

·       Is your data digitised, validated and verified?
·       Are your processes documented, automated and self-learning?
·       Have you evaluated the opportunities presented by biometrics and begun both the development of technology and reaching out to your membership to enable the collating of their biometric details?
·       Are Artificial Intelligence and Social on your radar as critical tools to engage with your membership and allow them to understand their accumulation and decumulation options based on their own learning styles?

The world is moving on and much of the pensions industry is still locked into legacy systems, poor quality data and paper-based communication with members.

A good example are the historically lethargic electricity companies who are moving ahead with smart meters, user-updated readings and online switching. Add to that, innovations such as Nest thermostats, Google Home and smappee, and the world of pensions looks archaic and out-of-touch.

It is not that we are short of money. Our industry is responsible for over two trillion GBP of assets across DB and DC arrangements. This is money that we are holding in trust for savers across the country and globally. Many savers continue to invest, with just Defined Contribution assets under management expected to double to one trillion GBP by 2025. However, we have an equally important role for Deferred members, to allow them to view their savings, estimate their projected growth and make decisions in terms of accumulation and decumulation, where relevant. Pensioners of course require their assets to be safe, their correct pension to be paid on time and the ability to efficiently make enquiries whenever required.

The danger is that if we as an industry do not raise our game, the Pension Regulator is likely to move ahead with first greater regulation and then enforcement action. We know that the Regulator is already looking at data and administration issues for smaller pension arrangements. However, its Executive Director for Regulatory Policy, Analysis and Advice, David Fairs, recently stated that they are concerned about the quality of scheme administration in general and are considering an authorisation regime. As we know, a regulatory regime is geared toward driving a minimum standard, which in itself may be welcome, rather than an environment of innovation and high quality services.

We are not suggesting a pie-in-the-sky rush into untested technology development, more so a shift in approach. When thinking about technology, it’s important that those driving purchasing decisions consider it as investment in the future of their scheme, not ‘unnecessary’ cost. So closely considering the tools and technology available that could have a positive impact on the long-term running of their scheme – and its members. The future is here. Are we willing to embrace it?
Girish Menezes, Board Member at PASA.