Those trustees coming to market for the first time in a while may be surprised by the range of technology options touted by both traditional and start-up players. Most administrators now rely on one or more digital platforms as a core component of their offering. While these are commonly developed in-house, some are licensed from a specialist developer: both can offer significant benefits for schemes looking to drive member value.
If you are looking at these new approaches, it’s important to know that standard administration contracts need to be amended for technology-led administration services. These are no longer pure ‘business process’ services, but rather now more akin to procuring cloud-based ‘as a service’ offerings.
What’s useful to think about in relation to these innovative new approaches?
- Platform selection. Trustees must consider both (a) the functionality on offer (what are administrator personnel and members able to achieve on the platform? Does the platform work alongside existing systems like payroll?), and (b) the roadmap for future development (is there a commitment to ongoing regulatory compliance? Will the administrator absorb the costs or spread them out across its customer base?).
- Data and security. While established providers usually understand trustees’ regulatory and data protection obligations, they generally take a robust approach to liability for data loss and cyber security incidents, and the adoption of trustee or employer policies and procedures. This makes it more important than ever to understand the provider’s approach to data location (storage and remote support), use of subcontractors, and adherence to key security and data breach standards.
- Data cleansing. Will the administrator take responsibility for conducting data cleansing or mapping? This is a particularly important consideration for Defined Contribution (DC) schemes that are thinking about moving to a DC Master Trust.
- Responsibility for errors and omissions. Will the administrator accept liability for unavailability or defects in the underlying technology platform?
- Continued access to the platform. Finally, will the administrator have continued access to the platform in the event of insolvency or breach by the platform provider? Similarly, what is the position on exit? Can a replacement provider take over the relevant platform licence?
As the market continues to evolve, the key message is that trustees should plan ahead. Whether negotiating with an incumbent or new provider, ensuring the right negotiation team is in place and maintaining some competitive tension in the process can be critical to ensuring the best outcome for members and the scheme.
This article was featured in Pensions Aspects magazine October edition.
Last update: 27 January 2021