Straight-through processing (STP) should be a basic requirement for trustees when it comes to the administration of defined contribution (DC) pension plans, says Mercer.

The financial consultant is calling on trustees to make this demand following evidence that STP reduces the risk of human error, speeds up transactions and reduces overall pension scheme administration costs.

The automation of communication about investment transactions between scheme administrators and fund managers is a benefit of STP, and up until now, Mercer says the process has been slow and subject to errors.

Claire Ross, head of service implementation in Mercer's pensions outsourcing business, said: "In the last year, we have seen STP working successfully in a number of organisations - demonstrating enormous benefits to trustees, fund managers, scheme administrators and, of course, scheme members.

"With fund values rising, investment trading by individual scheme members is starting to pick up again, and trustees face increasing pressure to ensure their trading information is accurate and up to date - especially where online access is provided and members expect their transactions to be conducted in 'real time'."

On average, it takes five working days to make individual pension fund transactions, but automated end-to-end dealing through STP can reduce this to three days or less. Human error risk is virtually eliminated.

"Pension scheme risk has become a serious business issue at the corporate and trustee level. As defined contribution schemes become more mature and individual transaction values increase, human errors can expose trustees and employers to considerable financial risk. Some compensation cases have already involved six-figure payments.

"STP has the support of the Pensions Regulator but, to become the industry standard for investment transactions, the drive may need to come from pension scheme trustees. We believe trustees should now be demanding this service level of their current providers and specifying it in their tender documents," Ross added.

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