ABF switches platforms for reduced fee and wider range of funds

According to an update published on the ABF scheme’s website earlier this month, the trustees have decided that, “following a review of the DC investment platform, the platform will be transitioned to Mobius Life over the next few weeks.”

It adds that “this will bring a number of benefits to members including a reduced platform fee and a wider range of fund choices”.

It just shows that their governance is working, that they are keeping an eye on things properly and they’re trying to make changes in members’ best interests

Maria Nazarova-Doyle, JLT Employee Benefits

The Pensions Regulator is upping the pressure on trustees to consider the value for money they get for members and solutions to improve value, like platforms. Its online guidance on DC investments notes that markets change and investment products and techniques evolve, adding that it is important to “consider the ability of the scheme to access new products or fund structures using different techniques, for example, through a platform”.

In preparation for ABF's transition, investment transactions will be suspended between March 5 and March 19 so that all of the funds registered with the current platform provided by Phoenix Wealth can be re-registered to the new platform.

The trustees have highlighted that the majority of the funds available at the moment will not change. The only exceptions to this are three self-select funds that are not available on the new platform.

Members with pension accounts invested in these funds will receive a letter from the trustees explaining the replacement fund they propose to switch members’ units into, or the alternatives they can choose from.

More schemes opting for platforms

Maria Nazarova-Doyle, head of DC investment consulting at JLT Employee Benefits, says: “There are a lot of benefits to being on a platform – we’re seeing more and more schemes generally going down that route.”

Some of the main reasons for opting for a platform include flexibility and easy implementation, according to Ms Nazarova-Doyle.

For example, a traditional DC default that includes different asset classes with different managers can be an administrative burden.

“The scheme has to have an agreement with every manager... if they want to make changes they need to coordinate things between different managers who can have different deal cycles,” explains Ms Nazarova-Doyle.

A platform, on the other hand, can simplify everything. “You only have one contact – the investment platform… there’s no problem with pricing, it’s a lot easier and everything is daily dealt normally on a platform… so you could kind of put a trade in anytime you want,” she says.

Platforms also offer additional services that can be charged within the platform fee, meaning a single employer trust-based scheme could charge administration fees to members, for example.

But, as with any kind of service provider, it is important to conduct regular reviews, and this could lead to a switch.

“Obviously once you’re on the platform you start understanding more about the services... and how things have been,” says Ms Nazarova-Doyle.

Sometimes that might mean schemes will change platforms, she says, adding that “it just shows that their governance is working, that they are keeping an eye on things properly and they’re trying to make changes in members’ best interests”.

Avoid data discrepancies 

Dan Taylor, director at third-party administrator Trafalgar House, says transitions involve moving a very large data set from one system to the next.

“Inevitably, both providers – those that are transferring the data and those that are receiving it – need a period to export and then import and reconcile and then publish the data,” he says.

The blackout period is also designed to make sure that there are no discrepancies in terms of data.

“What you try to avoid is any significant or material change in the underlying data set, so you would not want individual freestyle member switches going through in a blackout period because that can invite discrepancies in the two data sets. Also things like lifestyle switching is often suspended from a particular period as well,” Taylor notes.

If the investment options available change, as with the ABF scheme, member fund transactions must also be carried out.

“That can sometimes be quite a complex process as well, so you need this blackout period where nothing will change within that window,” he adds.

Mr Taylor says that usually at least one test transition should take place to weed out any issues before the live transition.

He warns that material changes in the underlying data set between the testing and the live data cuts can lead to delays.