Pension administration providers offer increasingly similar core services, but significant differences in pricing, operational resilience and capacity mean headline comparisons tell only part of the story, KGC Associates has warned.

The firm’s 13th Administration Survey found that providers offered an average of 95 per cent of the 31 core services assessed.

All 15 participating administrators provided at least 27 services, while 14 included 90 per cent or more, indicating that the core administration proposition has become increasingly standardised.

However, KGC said looking similar “on paper” did not mean providers would deliver the same experience for members or trustees, particularly as administrators faced growing pressure from pensions dashboards, guaranteed minimum pension (GMP) equalisation, de-risking activity, regulatory change and large-scale data projects.

KGC Associates head of research and survey author, Hayley Mudge, argued that the importance of core administration had increased as providers were asked to deliver a broader range of work alongside business-as-usual services.

“The core administration service hasn’t become less important. If anything, the opposite is true," she said.

“But what providers are being asked to deliver alongside it has grown considerably.

“Alongside the day-to-day job of running schemes and supporting members, providers are dealing with major data projects, regulatory change and other competing priorities, often drawing on the same people and resources.”

Mudge warned that trustees could not assume that administrators offering the same services had equivalent delivery capabilities.

“Comparing administrators through a checklist of services only tells you part of the story,” she continued.

“A service list can tell you what a provider does. It can’t tell you how well it’s equipped to deliver when demands increase, or priorities compete.”

Meanwhile, the report found that capacity constraints were viewed as the biggest pressure facing administration by 36 per cent of respondents, followed by AI and automation at 28 per cent, pensions dashboards at 22 per cent and regulatory change at 15 per cent.

Digital functionality itself was also becoming less of a differentiator.

All participating providers offered members real-time access, personal data management, expression-of-wish forms and online scheme document libraries, while 93 per cent offered role-based access to trustee or employer portals and multi-factor authentication.

However, more advanced functions remained uneven. Just 53 per cent offered case tracking or secure messaging, 46 per cent offered an online defined benefit (DB) retirement journey and 40 per cent provided electronic signatures or digital consent.

KGC also identified significant differences in pricing between providers serving schemes of comparable size.

For a 500-member model scheme, total recurring first-year administration costs ranged from £37,400 to £73,780, with an average of £50,876.

For a 20,000-member scheme, costs ranged from £513,350 to £1.05m, averaging £726,811.

Although average costs per member fell as schemes increased in size, KGC noted that scale alone did not determine pricing, with operating models, service design and commercial assumptions also influencing costs.

Notably, pensioner payroll showed the greatest variation among core administration services.

For a 20,000-member scheme, quoted payroll charges ranged from £46,000 to £368,200, while exit fees were identified as the least standardised area of administration pricing.

Seven providers offered a fixed exit fee, five supplied a range, two charged on a time-cost basis, and one did not disclose its approach.

Non-core services also attracted different charging models, with major regulatory projects, large-scale data remediation and merger or acquisition work generally priced on a time-cost basis.

Meanwhile, GMP reconciliation was largely complete, with most providers reporting completion levels of between 75 and 100 per cent.

However, rectification progress ranged from 10 to 90 per cent, while most providers reported that only 20 to 40 per cent of GMP equalisation delivery had been completed.

Support for vulnerable members was more established, with 67 per cent of providers describing their approach as fully embedded and the remaining 33 per cent saying it was developing.

No provider reported having only a reactive or limited approach.

KGC Associates managing director, Kim Gubler, said trustees and sponsors needed to assess the infrastructure supporting an administration proposition.

“One of the clearest messages from this year’s research is administration capability can no longer be judged simply by the services listed in a proposal or contract,” she stated.

“Most providers now offer very similar core services. The real differentiator is how consistently those services are delivered as operational demands increase.”

Gubler added that schemes should examine providers’ operating models and the resilience of their people and technology.

“This means understanding the operating model, the resilience of the people and technology supporting it, and whether the administrator can continue to deliver when regulatory change, major projects and business-as-usual all compete for the same resources," she concluded.

---