The Personal Accounts Delivery Authority has whittled down its short list of administrators to four.
These are a consortium – including Logica UK, International Financial Data Services and DST Systems; Tata Consultancy Services; a Danish firm called Arbejdsmarkedets Tillægspension (ATP); and a team made up of Great West Retirement Services and Canada Life. An eclectic mix.
The new administrator has a tough job. It will be in charge of administering individual accounts, dealing with a colossal number of leavers and joiners to the scheme on a daily basis and issuing regular statements to members.
The administrator will be responsible for collecting the right amount of money from millions of people across thousands of small businesses, moving it down the right pipes, making sure it lands up in the right funds and is credited to the right account. In addition, it must juggle refunding contributions to the estimated 30 per cent of people who opt out, together with their employers.
Choosing the right person to do this job is vital. In making its selection, Pada and the Government, quite rightly, are worried about cost but it would be a mistake to make this the only criterion.
The new administrator will have to deal with millions of transactions in the right way and at the right time. To fail could risk making the personal account scheme front-page news for all the wrong reasons, harming not only its reputation but pension saving in general.
Not only must the administrator carry out all that employers and members demand of it, but it must bear in mind that personal accounts are, first and foremost, a pension scheme.
Over decades, the Department for Work and Pensions and HM Revenue & Customs have created a complex web of rules and regulations that pension schemes must abide by. “Pension simplification” did not live up to its name.
The scheme administrator’s job is not easy, it must stay on the right side of authorised and unauthorised payments. Getting it wrong could mean tax implications for the individual and for the scheme.
If all this sounds spookily close to the task the current crop of pension providers carry out, you would be right. The personal accounts scheme will be held up as a benchmark of good administration for other pension schemes to match, especially the private pension schemes it will be competing against.
Over the past few years, we have designed and built administration and contribution collection mechanisms. Experience shows we can offer this to employers for a “clean” charge, typically of around 0.5 per cent a year of the fund. That price excludes the cost of distribution and advice. It not only includes the administration and contribution collection functions but also customer helpdesks, employer service relationship managers, bespoke marketing material – including bespoke websites – and fund management.
Employers choosing who is going to collect their pension contributions and administer the pension accounts for their workers will start by comparing what personal accounts can offer in comparison to the market today.
In making that decision, cost is unlikely to be top of the employer’s list. Quality administration and other features, such as customer helpdesks, will be.
Rachel Vahey is head of pensions development at Aegon