Administration, risk control and competitive fees are the three key considerations that drive decisions over choice of platform providers for defined contribution (DC) pension schemes, a report by BNY Mellon in association with Cerulli Associates, has found.

The report, which surveyed 54 pension schemes, forecasts a potential shift in the infrastructure that allows pension schemes to receive administration, investment and communication services combined – seeing a move from unbundled platforms to bundled offerings.

The trend is believed to be prompted by developments and innovations in full service bundled platforms, which will allow for cost savings and administrative efficiency.

As a result, the investment firm predicts an increased take-up of bundled platforms, said to “play a defining role in the future delivery of workplace savings provision”.

In addition, the traditional consultancy model is said to ‘evolve’, with one-third of pension providers expecting less involvement with consultants and corporate advisers once a platform provider has been appointed.

“The challenge for consultants and corporate advisers is to expand the scope of their services and demonstrate better value for money in a corporate pensions market that will be increasingly dominated by platforms,” the report said.

It also found that platform providers will need to build dependable and scalable administration systems to capitalise on the expected shift in the market; and that deep pockets will be essential to success.

David Calfo, group head of DC strategy at BNY Mellon, said: “The industry has reached a watershed. Developments initiated in the next 12-18 months will have a lasting effect on shaping its future. Several legislative initiatives, from auto-enrolment to the retail distribution review, have created further impetus for all those involved to review their existing models.

“The changing marketplace means that today’s front-runners may not be tomorrow’s leaders. Consultants and advisers will prefer to work with platform providers that are aligned to their current and developing business models and those that are expected to evolve in line with their future needs, as well as those of their clients.”

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