TPR: Why pension administrators are in the regulator’s sight

The Pensions Regulator said it wanted to do more to help pension scheme trustees do their job properly. In a blog Why we are building relationships with pension administrators posted on the TPR's website Cliodhna Judge, interim head of relationship supervision, front line regulation, wrote:

"Pension scheme trustees are the first line of defence for savers. That’s why driving up standards of governance and administration in pension schemes is central to our work and vital to ensure savers receive the pensions they are due."

Judge said administrators also had a crucial role to play and it would be changing its regulatory approach to work more closely with administrators.

Judge added the TPR was in the process of establishing open, two-way relationships with a number of strategically important pension administrators to understand the challenges and tackle the risks.

Dashboards programme

The TPR said it was determined to find out more about how trustees interact with administrators, and what barriers currently existed.

At the same time, it added, the Pensions Dashboards Programme had become a catalyst for ramping up engagement between trustees and their administrators, who are pivotal to the success of the programme.

"These drivers of engagement have highlighted a need for us to enhance our regulatory approach to engage directly with administrators. We want to understand more about what makes for good and poor administration and be in a position to respond to issues as they materialise," said Judge

In January 2022 the TPR created its first administrator relationships function, a team dedicated to engaging directly with third-party pension administrators to extend the TPR's reach and influence.

The pilot administrator received a report on areas to consider for business change; these included enhancing internal checking processes, recognising the need for a clear IT and technology plan (including the exploration of digital verification practices), and developing better communications.

Judge continued: "The pilot worked well for TPR also. We gained a better understanding of current market challenges in more detail, enabling more visibility of administration risk, and have been able to embed the lessons from the pilot into the ongoing design of the Administrator Relationships initiative.

Expansion 

Following the pilot TPR now works with third-party pension administrators on a voluntary basis. 

"Our work already covers around 10% of pensions administration market, representing around nine million members in 1,500 schemes. We are looking to expand this in due course.

"We’re tackling the risks of poor administration, driving up standards, promoting best practice (or identifying areas where guidance would support standards) and learning more about the core challenges and issues third party pension administrators handle on a regular basis.

"These include responses to cyber security incidents, resourcing issues, the recruitment and retention of a skilled workforce and the management of data quality.

This insight, which builds on our existing work on trusteeship and value for money, is helping us support and influence the administration industry to make improvements to standards, build confidence in the pensions system and ultimately protect savers."

Industry response

The TPR's comments were welcomed by Kim Gubler, chair of the Pensions Administration Standards Association. She said: “PASA is fully supportive of TPR seeking to support better administration standards.  Our whole raison d’etre has been about raising standards to improve outcomes for pensions savers. 

 “Administrators are striving to introduce greater efficiencies through better underlying data, use of technology and customer service.”

Gavin Giles, head of pensions administration at consultancy Broadstone said the TPR’s comments emphasised the importance of administration and how it could improve outcomes for members. Giles said: "Improving dialogue between administrators and trustees drives up standards of scheme governance which is crucial for acting as a first line of defence for members as well as enhancing data quality, engagement and dashboard readiness."

“We are glad that the regulator is banging the drum for administrators. Poor administration is a danger to member outcomes and the reputation of the industry so we must do all we can to ensure the highest standards are upheld across the industry.”