Regular pension admin systems reviews necessary

Sonia Speedy asks how often a pension administration system review should take place.

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The need to review systems can be triggered by several factors including lack of supplier support, the need for a major upgrade and changes in pension scheme design.

Opinions differ on how regularly reviews should be carried out and will be affected by the size of a business.

Things like supplier support, system functionality, the need for interface updates and keeping pace with technological developments should all be considered during a review.

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With A-Day fast approaching, employers have been busily reviewing and updating their pensions administration systems.

But what happens after pensions simplification? How often should employers that carry out their own administration be reviewing their systems and what should they look for?

According to Barry Mack, principal at Mercer Human Resource Consulting, there are a variety of post A-Day review triggers. If a system is to have a major upgrade, for example, this may well lead to a full review as a lot of effort will go into testing the upgrade in any event. Likewise, mergers and acquisitions may prompt a review, in order to bring different pension scheme systems together.

Allan Course, head of administration consulting at Watson Wyatt, points to situations where firms may have a defined benefit scheme for instance, that its systems adequately administer. But when employers decide to introduce a defined contribution scheme for new entrants, the system may be left unable to cope.

There can also be occasions where a system provider no longer supports the version of a system an employer uses, causing difficulties when it comes to making system changes or responding to legislative change.

Opinions vary on how frequently reviews should be carried out. Mack suggests a review needs to be undertaken every three to five years. However, after a major systems implementation, a review may not be needed for five years because the first couple of years will be taken up by the implementation itself. After that, he believes three-yearly reviews are advisable, although the business case for the system should have covered at least the first five years and usually longer.

Watson Wyatt’s Course takes an “if it ain’t broke don’t fix it” approach to reviewing systems. “It’s quite a huge exercise for most schemes to change computer systems, so it’s not something to do lightly,” he says.

Nigel Hatt, employee benefit specialist for group schemes at Towry Law, suggests reviewing administrative procedures as often as annually once A-Day has passed in order to ensure systems are complying with the changes. He believes further amendments to the current A-Day regime are likely and they will need to be accommodated.

So when the time comes for a review, what should employers look out for? Mack suggests employers should evaluate whether their system still provides the functionality needed, weigh up the cost of support fees and determine how well the supplier has supported them. Factors such as whether updates are needed to any of the interfaces on the system, such as for payroll, also need to be given some thought.

Meanwhile, employers need to keep an eye to the future. Members expect to see technological developments flow through to their pensions administration, so they can access information in real time online and obtain benefit projections, which has the added bonus of reducing the employer’s admin burden.