TPR seeks one-to-one engagement with ‘strategically important’ administrators
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The Pensions Regulator will try to build close relationships with a small number of strategically important administrators over the next two years to improve outcomes for members.
Amid a general trend towards outsourcing, third-party administrators battle along with slim margins and a looming mountain of project work, created through legislative requirements such as GMP equalisation, data cleansing for the dashboard, and the McCloud/Sargeant judgment affecting public sector pensions.
These issues have also led to the realisation that clean data is fundamental to paying correct benefits, fostering trust and avoiding legal action.
Given the importance the regulator places on data for ensuring good outcomes, it has now decided it will start an engagement campaign similar to that with schemes under one-to-one supervision.
TPR to risk-assess 75 administrators
Speaking at the Pensions Administration Standards Association’s annual conference on Tuesday, executive director of regulatory policy, analysis and advice, David Fairs, said that “over the next two years, we are looking to build strong relationships with a handful of strategically important administrators”.
Fairs said TPR is hoping administrators will engage on a voluntary basis as the regulator has no formal powers over them, adding: “We don’t have any means to compel, and we have no desire to compel.”
Because administration is concentrated among few providers, “by working closely with a handful of administrators, we think we can improve the outcomes for millions of savers”, he said, and “better understand the issues facing them” through direct engagement.
TPR will now risk-assess the top 75 administrators in the UK to identify those it considers to be strategically important, Fairs explained.
Areas of engagement could include:
trustee relationship management;
handling the transition of clients into and out of administrators;
data quality controls;
scams due diligence;
member communications and engagement;
systems and automation;
administrator resourcing and training;
business continuity; and
TPR will expect to hold regular meetings with the selected administrators, which will be an opportunity “to raise concerns, hear about our priorities and develop relationships”, said Fairs.
He sought to allay fears over a wholesale change, saying that the regulator is “not looking to undermine or replace existing rules” and will continue to support PASA and its standards, whilst looking to increase scrutiny of administrators.
Budgets allocated to admin will need to be revisited
The transition into and out of an administrator appears to be of particular concern; Fairs said some cases are going to court because administrators can charge high exit fees.
“People buy administration on price, not necessarily quality,” and so a contract needs to run for a period of time to be profitable for some organisations, he explained.
“We see that when an administrator loses a contract and it passes to somebody else, those pressures come to bear, and the ceding administrator tries to charge sometimes quite hefty prices to the new administrator,” he said. "It is something that concerns us, and it is something that we will look at as part of that... engagement with administrators.”
Some of TPR’s experience in dealing with administrators stems from its work on public service schemes. Between October 2018 and July 2019 it engaged with LGPS funds on governance and administration. The findings are sobering – they range from administrators not delivering on service level agreements, to pension scheme managers relying solely on assurances when the administrator is changing company structure.
While administration problems are often perceived to be with the administrator, Fairs suggested that the issue is also one of trustees and employers not valuing it sufficiently and therefore not investing enough in it.
“I think the dashboard is really going to expose where that is the case,” said Fairs, adding: “Fines of up to £50,000 might just focus attention, that perhaps it’s a good idea spending money on sorting out the data and administration.”
Will TPR’s engagement with administrators help to improve data quality?