Administration costs pushed UK pension scheme accounts up by 20 per cent in 2008, according to Watson Wyatt's annual Pension Scheme Cost Survey.

The survey showed that administration was the largest increase to scheme costs in a year that saw the highest proportion of responses from outsourced schemes in the survey's eight year history.

It also found that the average administration cost per member of schemes with over 40,000 members was £36 per year, those with between 10,000 and 40,000 members was £48 per cent, and £171 for schemes with less than 500 members.

The survey covered more than 168 schemes with a combined membership of over 5.2 million. The sizes of the schemes varied from under 100 members to over 450,000 members. 36 per cent of those surveyed were administrated in-house, with the remainder passing on the job to a third-party.

Peter Rennalls, a consultant at Watson Wyatt, said the cost between in-house and outsourced operations was narrowing - which could perhaps explain the 20 per cent rise.

"Irrespective of size, on average the costs for those that are administrated internally are less than those administered by third-party administration companies. But with significant increases in in-house costs, the difference is becoming increasingly marginal."

During a recent Pensions Age administration roundtable discussion (due to appear in the May edition of the magazine), panellists from HSBC Actuaries and Consultants, Barnett Waddingham and Hewitt Associates, all questioned the accuracy of the research.

Robert Branagh, specialist and public services director at Xafinity Paymaster - also at the roundtable - called the survey's findings "nonsense".

- Pensions Age April 2009

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