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Transitioning administration: it pays to plan ahead

Some pension trustee boards can find the prospect of transitioning scheme administration to a new provider so daunting they never actually do it. They’ve probably heard painful stories from others who went for it but tripped up along the way because they hadn’t done the right groundwork.

Proper planning prevents…

We all know that one, but it couldn’t be more true! Transferring to a new pension administrator can be absolutely the right thing for pension trustees to do. To do it smoothly and avoid scaring yourselves, you need a proper, well thought through plan in place long before you even think about starting the actual move.

Your scheme secretary should be able to help you, as pension trustees, get things right. I’ve been through a fair few administration transitions now and one of the key ducks I like to get in a row is ensuring a consolidated deed capturing all changes in legislation, benefit structure etc is produced. This reduces the likelihood of an error happening when the new administrator is having to look through multiple deeds and amending deeds to find an answer to a question.

Then there’s the benefit specification – this should also be completed and maintained to show the basis for all scheme calculations, discretions, trustee powers, consent agreements etc. Getting this right ensures, if the pension trustees decide to transfer the administration, it could be completed quickly and efficiently, with minimum clarification required.

Forgetfulness and underestimation

There are all sorts of difficult areas that tend to be forgotten about or where consideration is not given to the length of time they will take. Transition/termination agreements always take longer than you think they should (I guess that’s true of getting almost all legal documentation right though!).

Blackout time – the gap between your outgoing administrator stopping work and your incoming provider starting – needs to be prepared for. You don’t want it falling at a crucial stage in another pension project, when a batch of retirement calculations are due or data will need to be provided to send out member communications. Talking of which…

It can be all too easy to forget about members when the multiple, complex strands of a pension administration transition are under way. Pension trustees need to manage members’ expectations. Make sure they know things are changing, when you expect the new administrator to be in place and what all the new contact details are.

Tell them about the blackout period, give them an alternative contact if they find themselves caught between the old and new administrator for some reason – and don’t only tell them once. Yes, include it in the trustees’ annual newsletter but send an email if you can, or better still a postcard (more people look at hard copy nowadays as it is unusual to receive) too.

And don’t forget to let your other scheme advisers and investment managers know. You need your new administrator to be able to obtain AVC information for retirements, transfers out etc and arrange disinvestments when required. You want a member’s first contact with the new pension administrator to be a positive one, but this won’t happen if the administrator can’t provide information because they don’t have the authority to deal with, say, the AVC provider!

Experience has shown me if you plan as much as you can for the known knowns and the known unknowns, the unknown unknowns of an administration transition won’t be quite so daunting and difficult when they materialise.



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