Spare a thought for your pension administrators

Administering occupational pension schemes is a tough gig. The past few months have seen a steady stream of new legislation which has meant administrators have had to make significant changes to their processes, systems and documentation over short timescales.

To give a flavour of the increasing burden, last November saw significant changes to the statutory transfer regime come into force. These changes were swiftly followed by new regulations published in January detailing the requirement to deliver a “stronger nudge” to pensions guidance from 1 June. October will see new requirements to deliver simpler annual benefit statements come into force followed by pensions dashboards which are scheduled for delivery in 2023.

To give an example of the pressure on administrators, the regulations setting out the new conditions on transfers were laid before Parliament on 8 November 2021 and came into force on 30 November. These regulations represent a significant change to the statutory transfer regime. Form an administrator’s perspective, they include a huge amount of detail relating to the two new transfer conditions which need to be satisfied before a statutory transfer can proceed. It is interesting that, despite the significant changes to the statutory transfer regime, the timelines for implementing transfers remaining unchanged. Accordingly, administrators have had to act quickly to review and update their transfer processes and member communications before the new requirements came into force.

From 1 June trustees of occupational pension schemes will be required to deliver the Stronger Nudge in relation to applications (and communications in relation to applications) to transfer or start receiving “flexible benefits”. These include not only DC scheme benefits, but also DC AVCs held within a DB scheme. In practice, it will fall to administrators to make sure these new obligations are met.

In summary, and subject to certain exceptions, trustees and managers (and therefore administrators) will have to (1) refer the applicant to appropriate pensions guidance and explain its nature and purpose; (2) facilitate a guidance appointment (currently, with Pension Wise), including offering to book the appointment and, where that offer is accepted, taking reasonable steps to do so; (3) explain that an application cannot proceed unless the applicant has received the guidance and notified the trustees or managers of its receipt, or opted out of doing so; and (4) explain that an applicant can only opt out of receiving the guidance by giving the trustees or managers an opt-out notification. Again, all of this will mean further changes to benefit application processes will need to be made within relatively tight timescales.

The theme of encouraging better engagement from members with their pension arrangements (with the consequence of increasing administrators’ workloads) will continue later this year when new requirement for trustees of DC auto-enrolment schemes to issue “simpler annual benefit statements” to their members (excluding pensioners) come into force. The new statements must not exceed one double-sided sheet of A4 paper when printed and will need to be prepared with regard to statutory guidance concerning the content and layout.

Administrators clearly face a difficult balance between taking the time needed to ensure their processes are updated and ensuring all of these new requirements are met and responding quickly to member requests (thereby avoiding member complaints and ensuring service levels agreed with their pension scheme clients are met). It is worth noting that all of the above work will be in addition to “business as usual”, ongoing projects such as equalising for the effect of GMPs not to mention preparation for the publication of TPR’s single code of practice later this year.

< Back to blog