With the work of lay trustees becoming more complex, and the pandemic highlighting other areas in need of sponsors’ attention, the Furness Building Society has opted to outsource services for its defined benefit scheme, a trend that is expected to accelerate.
The Barrow-in-Furness-based provider of financial products chose the Enplan Pension Platform after a tender process to provide governance, actuarial, investment and administration services for the Furness Building Society Pension & Life Assurance scheme, which has 200 members and assets of around £30m.
The platform bills itself as a comprehensive governance solution, and typically services legacy DB schemes that are closed to new members.
The package includes actuarial advice and administration services from Isio and professional trusteeship carried out by Entrust, which ordinarily will act as sole trustee and handle all secretarial work, explains Isio partner Andrew Goddard.
I think it does feel like we’re sort of reaching a little bit of a tipping point in the market
Andrew Goddard, Isio
While the trend toward outsourced solutions, professional trusteeship and the like is long-established, it has been remarked that the pandemic may accelerate this trend, in part by forcing scheme sponsors and employers to look more closely and ask different questions of their pension schemes than they had previously.
Employers have been questioning whether they need to spend time and money administering the scheme, or if there is a third party that can do it better and cheaper on their behalf.
Pamela Mawson, chief compliance officer at Furness Building Society, argues that the “job of a trustee has become increasingly complex, making the job of a lay trustee more difficult”.
“Moving to a sole professional trustee will benefit the scheme members and mean less management input from the society.”
She says advice and administration services provided by Isio are also part of the appeal, and that it is hoped joining the Enplan platform will “help us reach full funding more quickly".
Covid-19 increases focus on governance
Chris Harrison, Furness’s chief executive, explains that Covid-19 also played a part in this decision.
He says: “As the effects of the pandemic have spread across industries, building societies’ already growing focus on governance has been significantly accelerated.
“The immediate positive impact of joining Enplan on our governance has been clear, and we are confident of a successful future relationship between the Furness Building Society and Enplan.”
Richard Hassan, director at Isio, notes that in the case of the building society, the sponsor was finding that governance “was taking quite a bit of their time”.
“They wanted everything under one roof,” he says.
Prior to joining the platform, Furness was having to keep track of its independent and member-nominated trustees on top of undertaking the business of scheme management.
Mr Goddard says that the Covid factor may play a part in driving the outsourcing trend in future, since sponsors that outsource governance and trusteeship will then have more time to spend managing their businesses through these particularly difficult times.
This is something with which Ms Mawson agrees. “We believed the improved governance and efficiencies were even more important due to the potential economic consequences of the pandemic,” she says.
Outsourcing trend accelerated
Coronavirus is only one prompt towards outsourced services, with longer-term considerations such as increased regulatory burdens making professional governance and trustee offerings particularly attractive, according to Entrust professional trustee Stuart Evans.
“The regulatory environment over recent years has got more and more difficult to negotiate for people who aren’t professional trustees, so we’ve definitely seen an increase in demand over the past few years,” he notes.
Mercer launches DB master trust as demand for consolidation increases
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Of course, all of this can be expensive. But Mr Goddard argues that, in the right circumstances, it can prove cheaper than the alternative, not least because platforms can have access to better fund managers and the like.
“We often take 30 per cent off adviser expenses, and you might take 20 or 30 basis points off the investment costs the scheme is running as well. So you save cash, you save costs on fund managers, and you save a lot of time as well,” he says.
“I think it does feel like we’re sort of reaching a little bit of a tipping point in the market, where more and more people are starting to think about whether master trusts or platforms might be a better way to run their schemes, particularly at the smaller end.
“I think we’re going to see a lot happening in the consolidation space in general,” he adds.
