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The evolution of pensions administration

Evolution of pensions
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The evolution of pensions administration

Positive member experiences often rely on the pensions administrator. Having the right people at the heart of your scheme can lead to increased engagement and better communications. But with so much change in recent years and the way we communicate constantly evolving, what is the role of a pensions administrator today? It’s a topic we covered at our recent Food for Thought event where we were joined by Daniel Taylor, Client Director at Trafalgar House. Dan shared his insight on the evolution of pensions admin and ways providers can adapt to keep up with members’ growing needs. Here’s a summary of Dan’s presentation:

It’s always been assumed that evolution is a slow, gradual process. Incremental changes to a species happen over a long period of time and this speed of development is something that is associated with the administration market. It’s not hard to see why; twenty years since websites were born and fewer than 15% of occupational pension schemes have interactive member websites. Ten years since the iPhone and even fewer have mobile sites or apps developed. However, administration has changed and developed over time, though perhaps not in the gradual linear way that traditional theories of evolution suggest. It’s more closely related to a theory that was put forward by two paleontologists in 1972. Their study of fossils led to the theory known as punctuated equilibria, which proposes that species remain in a state of inactivity for long periods of time before suddenly being punctuated with rare bursts of rapid change. Many people looking at pensions administration might only see periods of inactivity but there are a number of events that have led to rapid change.

The changing landscape

There are a number of events that have changed the admin landscape but two major ones spring to mind: the introduction of pensions freedom and auto-enrolment. They alone have forced many providers to change how they think, operate and organise their schemes.

When pensions freedoms and choice launched in 2015, many people thought it would be a short-term anomaly, with a momentary burst of action before a return to business as usual. But while this is true in part, administrators have actually seen more engagement and a sustained increase in member enquiries, which shows no signs of abating. Pensions freedom has obviously come with challenges as many people look for more information regarding their future options. But those administrators that have been able to plan ahead, develop new solutions and communicate effectively have adapted and flourished and, no doubt, built stronger relationships with their customers because of it.

Auto-enrolment has had a more fundamental change to the structure and demands of pensions admin - the total number of deferred pension entitlements has increased dramatically from 11.8 million in 2015 to 15.4 million in 2016. As well as this, scheme closures and changes to the structure of the UK labour market have altered the composition of many a scheme’s membership.. To adapt to this new environment administrators need to be proactive and creative in the way they interact with deferred members - that way they’re far more likely to build long-lasting relationships which give members the support they are looking for.

The evolution of technology

There are plenty of other factors within the evolutionary chain that have led to improvements to pensions admin and technology is definitely one of them. The introduction of electronic document management and advanced workflow processing at the back end has improved external member experiences. The rise and rise of the smartphone and the way people access information has also led to undeniable change. More and more people are using mobile devices to access information on the go. The 2017 Deloitte Mobile Consumer Survey found that smartphone activity among 55-75 year olds has increased by 42% over the last five years so it’s clear that those thinking about retirement and what it means for them will be doing so by searching for information on the move. It’s now more important than ever for administrators to consider the changing face of technology and how they can adapt their communications to increase engagement.

A need for better communication

The classic theories of evolution allow for very long periods of time to introduce, ingest and capitalise on developments. The main problem in recent history has been the frequency and intensity of external evolutionary pressures - both auto-enrolment and pensions freedom were implemented relatively close together and the cracks have started to show. According to Pensions Ombudsman statistics complaints have been up 20% in the last year and, more shockingly, the total number of investigations has doubled in just a three-year period. Failure to provide information is listed as one of the top complaints so it’s clear that administrators need to find new ways of working and engaging with members in order to survive.

Evolving for the future

On the surface it may look like pensions admin is now going through a period of inactivity but it’s still facing a challenge. This time the change isn’t coming from external forces, it’s from within. The market is in flux and is recalibrating. Some providers have withdrawn from the market, others have joined forces. Those organisations offering a ‘bundled’ service are facing the threat from a growing number of specialists. Administrators who want to improve what they’re doing can take this time to reflect and make changes of their own. There are a number of factors that are still evolving that could impact the future of administration. There’s more discussion around artificial intelligence and how better tools and chatbots might help with member queries. There’s also the role of personalisation in communication; with so much information out there and so many devices to access it on, consumers crave personalised content (a recent study revealed that 74% of people feel frustrated when website content is not personalised). It seems providers are already adapting to this as we’re seeing more personalised video content and statements reaching members. But nothing stands still.. There will always be new technology on the horizon and new ways of reaching and engaging with people. There will always be events that lead to rapid change within the pensions industry and (just like in evolution) these external forces and environmental changes mean that schemes need to adapt and evolve quickly or they risk being ‘fossilised’.

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