PASA’s July 2018 Administration Governance Checklist aims to help trustees evidence and action appropriate levels of governance over their pension administration provider. Covering eight key areas (administration agreement, reporting, operational procedures, business continuity, change control, controls assurance, data management, and staffing), the checklist is derived from PASA’s existing governance principles.

PASA accredited member firms are explicitly exempted from the checklist on the basis that they are already regularly (and robustly) assessed against PASA’s standards. However, given the almost glacial industry pace towards accreditation, the vast majority of UK occupational pension schemes could potentially integrate PASA’s checklist into their existing governance structure.

A question of scale

From the TPA point of view, the checklist is a welcome new player on an already crowded stage. Third party administration is an industry that routinely operates under a huge amount of oversight. Internally, there is peer review of almost all work, integrated checklists, structured authorisation processes, and regular performance reporting. Externally, a high degree of independent assurance comes with the annual scheme and AAF audits, risk registers, ISO accreditations, and also from PASA itself. This is an industry that already has governance front and centre. Looking at the checklist from the point of view of an accredited member firm, PASA’s checklist naturally covers what we would expect to already be in place for high quality administration.

Taking another view though, there are questions to be asked around if and how smaller in-house teams can be supported to deal with ever increasing complexity and specialisation in delivering administration services. Don’t think 30,000 member scheme with a professional in-house team working, in well defined roles with a robust budget and business plan. Think 500 or 1000 member schemes, probably closed to accrual, with one or two in-house administrators filling all the pension functions, maybe with some payroll and HR responsibilities thrown in. For these schemes, the governance challenge is likely to be uphill all the way.

Calling on the experts

Bringing in specialists to review the governance framework against the PASA checklist could be an area where external expertise can add value in a measurable and standardised way. This type of reporting can provide comfort over the design, implementation and operating effectiveness of the in-house administration model.

Keeping the scheme fit for purpose

A key part of governance is being aware of all the options, limitations and incentives open to the scheme. As the pension environment continues to change very rapidly, the way that schemes are administered must adapt. This is especially true with the increasing maturity of defined benefit schemes and the move towards de-risking projects which require highly specialist knowledge, rarely available to in-house teams.

Straddling the operational procedures and change control areas of PASA’s checklist, the provider’s ability to deliver and manage change actually opens up a wider conversation around the ability to envisage the changes that can or should be made. This is where in-house administrators are most likely to struggle without specialist input.

Stronger together

That’s not to say that third party administration is made up entirely of gold stars. Few providers are currently PASA accredited and even in the TPA environment standards vary, and, administration can only be as good as the combination of corporate and commercial priorities allow it to be. But, in the main, the entire point of the TPA industry is to be exceptionally good at pension administration and, eventually, PASA accreditation will naturally follow suit.

Michelle McInnes

Pensions Administrator – Barnett Waddingham


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