Tech smart or tech dumb?

Declan Boyle asks whether automation of calculations is dumbing down the expertise of pension administrators

Tech smart or tech dumb? Few questions have split the pension industry quite so decisively - this foray into devil’s advocacy was one of the questions covered in Barnett Waddingham’s autumn survey on administration quality, returning a yes/no split of 55 per cent and 45 per cent respectively and hinting at a clear philosophical divide on whether quality administration should prioritise people or processes.

While rumours of the manual calculation’s demise are somewhat exaggerated (most often in new business pitches), in the day-to-day world of pension administration automated calculations have become the norm - individual and bulk calculations, renewals, pension increases and payrolls are all carried out using integrated administration software. There are good reasons for this, all else being equal, automated calculations are more accurate, efficient and cost effective than having to calculate things manually. 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?

What effect does increasing automation have on pension administrators and their professional development? Those who have been in the industry for a number of years 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 who have come into an already automated industry? Pension entitlements involve complex and layered benefit structures so having a full understanding of current and historic scheme and regulatory processes is essential. Will the new breed of administrators really gain from a reliance on being able to press a button to produce a letter with all of the member’s retirement figures pre-populated? 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 EPBs be a distant memory? There will still be plenty of members with benefits affected by these issues, but if administrators don’t have sufficient knowledge, how can trustees be sure they are administering their scheme in accordance with the rules and the ‘relevant legislation’ when relevant legislation might be the position as it stood 40 years ago?

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 is key. For those coming into the industry progress through professional qualifications should be the number one priority. Companies should also be running ongoing training sessions for administrators with technical topics covered by more experienced staff to help newer administrators with their knowledge and understanding.

More widely, administrators should be strongly encouraged to regularly attend industry seminars. This will help administrators keep up to date with current changes in pensions and how any new legislation affects the schemes they administer. This type of information gathering empowers the administrator, giving them the confidence to drive technology, rather than letting technology drive them.

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. Simply put, exposure to complex and varied cases leads to better and more knowledgeable administrators.

Striking a balance

In practice, TPAs have a job to do for their clients and there are many advantages in being able to do this as cost efficiently as possible. On the other hand, there should always be a balance between cost efficiency, and ensuring that administration knowledge is kept up to date and allowed to develop. By focusing on education and development, administration providers can ultimately guarantee that they have the right level of experienced staff to do the job in a cost efficient way.

Declan Boyle is a pension administrator at Barnett Waddingham

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