How to outsource pensions management – a case study

There may be many reasons for an organisation to consider outsourcing their pensions management. For one UK business of a global engineering technology firm, significant HR time was being taken up dealing with pension scheme issues because it had no pension manager and the trustees of their defined benefit scheme (DB) had no secretarial support.

How to outsource pensions management – a case study

The organisation has three pension schemes: career average revalued earnings (CARE), DB and defined contribution (DC).

The issue

The pension trustees were aware changing legislation had increased governance requirements considerably over time. The majority of the board was due to retire, but they wanted to be sure good governance standards would continue.

The company knew they and the trustees needed increased support and would benefit from greater expertise. They originally preferred to employ someone directly but adding to headcount wasn’t an option, leading them to look at outsourcing solutions.

Spreading work across several existing advisers (such as the scheme administrator and pensions consultant) seemed to be expensive with service potentially disjointed, so they looked for a bundled service package instead. As accessibility to both the company and members was imperative, the package needed to include an experienced pensions manager willing to work on site one day a week.

The solution

The company now has an experienced outsourced pension manager for two days a week, with at least one spent at their office. This delivers numerous benefits, including:

  • expert guidance for senior managers
  • on-hand support for HR on pensions issues – helping them understand their pension schemes better and helping ensure they get automatic enrolment and re-enrolment right
  • an at work walk in service for employees to help with their pension issues
  • help with home visits for scheme members
  • an experienced extra pair of hands to help with other employee benefits including group life renewals and claims.

Their outsourced provider also delivers professional support for the DB trustees such as secretarial services, governance advice, tailored trustee training and management of pension advisers and providers.

The outcome

Despite being outsourced, their pensions manager quickly became an integral member of the in-house team and delivers a personal service that’s highly valued by the business, trustees and employees. They’ve helped deal with a variety of pension issues, including:

  • increasing operational effectiveness of the DB scheme, giving trustees greater confidence in their role and improving member communications
  • identifying annual and lifetime allowance issues for senior and long serving staff, ensuring protections were put in place
  • improving efficiency by transferring pensioner payroll to the pension administrator
  • simplifying documentation and highlighting inconsistencies between scheme rules and current practice.

It has proved to be extremely cost effective too – they have a pension manager with more than 25 years’ experience for a similar cost to employing an in-house administrator.

This article is provided by Punter Southall Governance Services.

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