Is automated processing ‘dumbing down’ administration?

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Few questions split the pension industry quite so definitively, this foray into devil’s advocacy was one of the questions covered in Barnett Waddingham’s earlier survey on administration quality. The results returned a yes/no split of 55% and 45% respectively, revealing a clear philosophical divide on whether quality administration should prioritise people or processes (hint – the only right answer on this is both).

Just this week I was asked this same question again in a more roundabout way by a group of trustees who wanted to know whether their administrators would still know ‘what was going on under the hood’ if the administration system was doing all the hard work.

Pension administration is high-volume and fast paced so automated processing has to be the norm - individual and bulk calculations, renewals, pension increases and payrolls should all be carried out using integrated administration software. All else being equal, automated calculation and processes are more accurate, efficient and cost effective.  Trustees should expect their administrators to have automated processes in place and to be making the absolute best use of evolving technology to take the strain out of pension administration.

Technology overload?

Coming at this from the other angle, what effect does automation have on pension administrators and their professional development? 

Administration ‘lifers’ will remember the days when all calculations were manual and every day was an adventure in interpolation, revaluation and our old friend, equalisation.  But what of the new generation of administrators coming into an already automated industry? Pension entitlements involve complex and layered benefit structures – ‘relevant legislation’ might be the position as it stood 40 years ago, so having a full understanding of current and historic scheme and regulatory processes is essential. Are we stripping out essential future skills in our drive for ‘push button processes’? And when automation fails, as it regularly and inevitably does, will anyone notice?

What will the industry be like in 20 years’ time? Will administrators understand the impact of the ‘A’ Day changes? The difference between Fixed, Limited and S148 revaluation? Why 1987 was ever a relevant date for AVC payers? Will Equivalent Pension Benefits be a distant memory? There will still be a huge pool of members with benefits affected by these issues, but if the administrators don’t have the relevant knowledge, will it just be question of pressing the button and hoping for the best?

Keeping knowledge current

We are all agreed that automation is here to stay, however automation doesn’t have to result in the automatic erosion of administration skills.  Technology gives us tools but knowledge gives us power and there are many things that can be done to ensure that administrators build or retain their pension knowledge:

• Education for those coming into the industry progress through professional qualifications should be the number one priority. For trustees, the ongoing professional development of the people at the member facing side of the pension scheme should be a key consideration in the governance strategy. If a trustee tosses a question about investment in training and education across the meeting table and the provider can’t come right back with a comprehensive breakdown of their strategy for staff development, there may well have a problem of the ‘pay peanuts, hire monkeys’ variety.
• Industry exposure more widely, administrators should be strongly encouraged to regularly attend industry seminars and training sessions.  This is a hugely supportive industry, rich with free or low cost training opportunities offered by a whole range of industry committees and groups. All too often though we stroll into a seminar and see the same sea of senior pensions faces. This is short-term thinking - get your junior people out there – two hours away from the desk costs practically nothing and can keep a motivated administrator up to date with current developments, legislation and thought leadership. Nobody can put a price on what this brings back to the team in terms of engagement and bigger picture thinking.
• Experience - whilst all the above will help administrators with their pensions knowledge, experience is the real key to professional development and a strong argument against a process-led ‘conveyor belt’ culture in pension administration. 

This article previously appeared in Professional Pensions.