Robust pensions administration – what the Pensions Regulator’s latest guidance means for trustees

In December the Pensions Regulator (“TPR”) published updated Administration Guidance (“the Guidance”) to help trustees, scheme managers and administrators comply with regulatory expectations and deliver high-quality administration.

The Guidance is relevant to the governing bodies of all pension schemes and sets out practical tips for meeting the expectations set out in TPR’s Administration module of the Code of Practice.

Administration is recognised as being a key part of ensuring good outcomes for savers.  At a time of technological change, rising member expectations and the dawn of pensions dashboards, it is crucial that trustees ensure their schemes have good administrative practices.  Capita and the Cabinet Office have recently issued a joint statement which illustrates some of the difficulties when things go wrong with administration. 

What the Guidance says

TPR highlights that delegating the administration function does not displace trustees’ duty to administer their scheme in line with the scheme rules and law. 

The Guidance introduces several new governance expectations that are included within the following six core areas:

1. Trustees’ responsibilities in scheme administration

2. Maintenance of administration IT systems

3. Key administration activities

4. Record-keeping and data management

5. Disaster recovery and business continuity planning

6. Maintaining the quality of administration service

We set out below a brief summary in relation to each of these areas. Please refer to the Guidance itself for the full detail.

Trustees’ responsibilities in scheme administration

• Schemes must have internal controls to ensure benefits are properly administered

• Trustees should maintain sufficient knowledge and understanding in administration

• Trustees should have a written administration policy (or administration strategy) in place

• Administration matters must be considered routinely, not just when problems are identified

Maintenance of administration IT systems

• Trustees must ensure administration IT systems are fit for purpose 

• Systems should support accurate record-keeping, timely processes and cyber-resilient operations

Key administration activities

• Member communications; contributions; transfers; payment methods; investment of DC contributions and processing incentive queries are covered as common administration activities

• Trustees should work with their administrators to identify the scope of administration that is specific to their scheme and documented in their administration policy

Record-keeping and data management

• Trustees must hold and maintain records as required by law and ensure data is complete, accurate and secure

• Trustees should take an active role in the oversight and management of member data

• It is good practice to formally capture the governing body’s strategic approach to member data in a data management strategy / plan

Disaster recovery and business continuity planning

• The scheme should have a business continuity plan (“BCP”) and a disaster recovery plan in place and both should be reviewed at least annually and tested periodically

• Trustees should seek appropriate assurances from their third-party administrator in relation to its own BCP

• Trustees should understand and evaluate the risks to the full supply chain involved in the scheme’s administration

 Maintaining the quality of administration service

• An administration policy is the essential guideline that governs scheme administration operations

• The Guidance sets out what an administration policy should cover

• Trustees should have robust documented arrangements with their administrators and should regularly review the suitability and performance against these arrangements

• Administration reports should contain information that enables trustees to assess their administrator’s performance and monitor progress against their administration strategy

• Quality assurance (set out in an administration procedure manual) is essential since it underpins accuracy, reliability and trust in pensions operations

Key points for trustees

• A new and notable requirement is TPR’s expectation that schemes adopt a written administration policy or strategy

• The Guidance places substantial emphasis on technology and the maintenance of IT administration systems

• Trustees are expected to maintain clear governance structures, escalation routes and regular performance reviews

• Trustees should have a focus on accuracy and quality-assurance procedures

• High-quality data remains a core expectation – member data should be treated as a “strategic asset”

• Effective continuity measures and disaster recovery planning are essential 

How we can help

We are well placed to assist trustees with:

• Reviewing their administration governance framework

• Creating a written administration policy

• Pensions dashboards compliance and data governance

• Reviewing and updating contracts with third-party administrators 

• Risk management and business continuity planning

• Providing ongoing training and support

If you have any questions or would like further advice on how to meet the expectations set out in the Guidance, please get in touch with Andy Prater or your usual Burges Salmon contact.

This article was written with support from Charlotte Gascoigne