Articles - TPR expanding their engagement with administrators

 David Walmsley, Interim Director of Supervision – Market Oversight at TPR 

 Administrators must juggle daily operations, project delivery and compliance requirements, while also managing member inquiries, resource allocation and new technologies. While regulatory frameworks aim to improve standards, curb fraud, and promote fairness within the market, the administrator sector remains unregulated, resulting in varying quality across the industry.

 TPR’s collaborative approach
 Recognising the impact that poor administration can have on savers, we adopted a proactive stance last year by piloting an initiative that engaged with three strategically significant administrators.

 This pilot focused on several risk factors including data digitisation and systems, data management and trustee/scheme manager engagement. The initiative was received positively, as these administrators were eager to understand more about our priorities and share insights from their own experiences.

 The pilot yielded significant insights, leading to actionable recommendations that administrators have already started to implement.

 Encouraged by this success, we will expand our engagement with the market. Our data indicates that 47 of the largest commercial and non-commercial administrators cover 90% of memberships. We plan to invite 10 to 15 of these administrators to voluntarily collaborate with us.

 We will use our learnings to adopt a light-touch approach with the rest of the market within the next 12 months. Through these engagements, we want to help influence a more diverse, secure and innovative administrator market.

 We’ll be engaging schemes of all types and sizes, both in house and third-party. Our goal is to better understand the challenges these administrators face and, through our active engagement, enhance outcomes aimed at protecting savers and enhancing trust in the pension system.

 Expanding focus areas
 Building on the pilot’s success, we’ll focus on four key focus areas.

 1. Financial sustainability
 Administrators must navigate the delicate balance between cost efficiency and high-quality service. We are aware of some of the challenges that affect administrators’ financial positions, growth plans and ability to deliver ongoing value to clients. We aim to acquire valuable insights into how administrators operate to deliver value for money and high-quality service to their members.

 2. Risk and change management practices
 Administrators have told us that the complexity and volume of legislative and regulatory changes, coupled with challenges in staff recruitment, training, and retention, are their three primary concerns, regardless of type or size.

 Our goal is to better understand how administrators manage these challenges and their associated operational risks. We are committed to collaborating with administrators to identify the root causes of these issues and work together on finding practical solutions that support effective service delivery to their end users.

 3. Cyber resilience
 Awareness of cyber-attack threats highlights the need for robust protections and fast reactions for sensitive data. We will work with administrators to steer them towards robust risk and incidence management practices and clear and fast member communications, ensuring that members are informed promptly and effectively.

 4. Tech and innovation
 Acknowledging the years of limited investment, many administrators continue to operate on legacy systems. TPR’s soon to be published administrator survey revealed that a significant number of administrators have no plans to increase their IT investment over the next two years, with in-house administrators and those managing smaller schemes being the least likely to do so.

 Without these upgrades, there is a risk that the value delivered to members may be compromised, as outdated systems can hinder service and quality. We will work with administrators to explore what their plans are for their existing systems and how they are considering taking advantage of new developments for efficient operations, security, and communication for their clients and savers.

 Collaborating with industry
 The administrator market continues to evolve without formal regulation. Through extending our engagement we will gain a better understanding of market challenges, enabling more visibility of administration risk and potential to embed lessons into the design of the next phase of our engagement with this market.

 Administrators play a critical role in safeguarding the benefits of millions of savers. However, they cannot do it alone.

 Trustees should value administration highly and recognise the value in secure and innovative service offerings. They and administrators must work together, driven by a shared purpose, to address the challenges ahead.

 However, exceptional pension administration demands significant investment. We collaborate closely with the Pensions Administration Standards Association (PASA), which provides practical guidance and promote best practise to help administrators support trustees in fulfilling their duties.

 Our ongoing efforts aim to help elevate administration services, ensuring positive outcomes for savers and bolstering confidence in the pension system. These are indeed exciting times in the pensions industry, offering opportunities for innovation and resourceful solutions. Together, we are shaping a stronger, more resilient industry and paving the way for informed regulatory decisions.