A few interesting snippets in Professional Pensions this
week, indicating changes to the pensions industry. The editor Jonathan
Stapleton is quite right to identify Aon’s move to merge its pensions
administration and HR processing businesses as the shape of things to come.
Pensions business is changing more rapidly today than ever. The large Defined Benefit plans are getting smaller. They’re all closed plans anyhow, so by definition, will decrease in importance. The admin, which might have been managed within a ‘package’ of fees covering the more lucrative valuation work, is now being exposed. Valuations are less and less big triennial events and much more ‘business as usual’ reviews at pretty much every trustee meeting. The complexities of yesteryear are lessening and the weeks of valuation calculations required of old have been replaced by pre written computer programmes with results at the touch of a button.
All this to say that Defined Benefit plans are not the monsters they once were and legacy administration merging with other processing makes sense. The administration of Defined Contribution plans is growing though, with an increasing numbers of members thanks to Auto-enrolment. Packaging is everything here. Simple plans, large numbers, computer processing, limited choice.
But behind the supposed simplicity of large Defined Contribution plans are hundreds of smaller ones, each with different rules, different needs and employers who often legitimately resist the pull to ‘merge’ with bigger plans and thus lose their identity.
With a combination of pressures on the pensions industry such as the recession and longevity, costs are a clearer focus than in the past. Providers will adapt. Providers will have to adapt, as Aon clearly are.
Admin is here to stay of course. And those plans too small for Aon’s radar will be picked up by smaller administrators. A changing pensions world. But not a decreasing one.
Pensions business is changing more rapidly today than ever. The large Defined Benefit plans are getting smaller. They’re all closed plans anyhow, so by definition, will decrease in importance. The admin, which might have been managed within a ‘package’ of fees covering the more lucrative valuation work, is now being exposed. Valuations are less and less big triennial events and much more ‘business as usual’ reviews at pretty much every trustee meeting. The complexities of yesteryear are lessening and the weeks of valuation calculations required of old have been replaced by pre written computer programmes with results at the touch of a button.
All this to say that Defined Benefit plans are not the monsters they once were and legacy administration merging with other processing makes sense. The administration of Defined Contribution plans is growing though, with an increasing numbers of members thanks to Auto-enrolment. Packaging is everything here. Simple plans, large numbers, computer processing, limited choice.
But behind the supposed simplicity of large Defined Contribution plans are hundreds of smaller ones, each with different rules, different needs and employers who often legitimately resist the pull to ‘merge’ with bigger plans and thus lose their identity.
With a combination of pressures on the pensions industry such as the recession and longevity, costs are a clearer focus than in the past. Providers will adapt. Providers will have to adapt, as Aon clearly are.
Admin is here to stay of course. And those plans too small for Aon’s radar will be picked up by smaller administrators. A changing pensions world. But not a decreasing one.
