Professional Pensions Admin Panel February 2010
The new draft disclosure regulations were published recently. In terms of the member experience, how do you believe this might be improved when these regulations become effective and what other changes would you like to have seen included?
Members will have higher expectations in terms of the information they receive, when they receive it and how they receive it. Both trustee boards and administrators will need to bear this in mind when considering not only what to communicate to the membership, but also when the information should be communicated and what the most appropriate medium for the information is.
Experience has shown that when a member communicates with an administrator electronically, they have higher expectations in terms of the speed of the response. Trustee boards may well therefore seek to renegotiate service level agreements with their administrator in the light of the new regulations and these will need to be clearly communicated to the membership so that their expectations may be appropriately managed.
The new regulations provide trustees with greater flexibility as to how (but not necessarily when) they communicate with members. In terms of administration, what changes to services do you think will be needed to allow trustees to take full advantage of this and what impact do you think there will be for them?
As the new regulations permit electronic communication, there will now be a requirement for the recording of a member’s email or electronic address so that any communication of this nature may be directed accordingly, if that is a communication method that a trustee board wishes to adopt. Consequently databases may well require updating to enable the recording of this information. In addition, electronic distribution channels will need to be implemented and regularly maintained to ensure they remain up to date.
However, it will be worth remembering that not all members will either have access to a computer or will want to receive communication relating to their pension benefits in an electronic format and traditional methods of communication will still be necessary for where a member opts out of receiving communication electronically.
E-communication is a key aspect of the proposals and is important to facilitate the introduction of the National Employment Savings Trust (NEST). What other impacts do you think the administration of NEST might have on the administration of occupational schemes?
Clearly the most significant impact is that NEST could lead to a decrease in the attractiveness of workplace pensions. With pressure on organisations to reduce costs and an increase in the financial burden as a result of the auto-enrolment and minimum contribution requirements, employers could seek to streamline their pension provision, to the detriment of the existing workplace arrangement. Employers may therefore seek to reduce costs by restructuring or even closing their existing arrangements, all of which will impact upon the administration of existing occupational arrangements.
In addition, the introduction of NEST should bring pensions to the forefront of people’s minds which may lead to an increase in enquiries to administrators as members seek to clarify the position regarding their existing benefits.
A possible consequence of the introduction of automatic enrolment and NEST is the higher incidence of employees holding multiple benefits, regardless of frequency of change of employment. What challenges do you think this presents for administrators and to what extent do you think there is a need (and an appetite) for consolidation of data from multiple providers to improve the member experience?
The whole process surrounding a member’s retirement will need to be carefully controlled to ensure that the relevant benefit and Lifetime Allowance information is obtained and submitted to the relevant providers in sufficient time to enable the payment of a members retirement benefits taking place at the relevant time.
Management of the member’s expectations and a clear, yet concise explanation of what’s required from them will be key. As suggested the member may well be entitled to benefits from a variety of sources, especially until such times as the provision to allow the transfer of benefits between arrangements is reviewed, which could well lead to confusion on the member’s part. This may well lead to a greater degree of support and guidance being offered by the administrator than has previously been the case.
by Daniel Jacobson
Client Manager