LCP poll: Over 70% of schemes believe pension administrator capacity is the biggest roadblock to buy-out
Pensions & benefits Post-transaction and wind-up support Pension risk transfer DB pensions Risk
Capacity constraints within scheme administrators is perceived to be the biggest risk to timetables for moving schemes to buy-out and wind-up, according to a recent industry poll.
In a recent LCP webinar on the pension risk transfer market, attendees were asked what they saw as the biggest risk to the timetable for a transition to buy-out and ultimately winding up their pension scheme. Over 70% of the 90 responses said that delays in their administrator completing data cleanse work (including GMP equalisation) was the biggest concern.
Insurer operational capacity was second, with nearly 20% seeing that as the biggest risk. Very few respondents cited other issues such as member complaints or surplus distribution as the biggest risk to timetables.
The bumper activity in the pension risk transfer market is creating high demand for administrators to complete complex data cleansing projects either to prepare schemes for transactions or move them to buy-out post transaction. This is coming at the same time as schemes are implementing GMP equalisation projects and undertaking detailed work to prepare to connect to Pensions Dashboards. There is a clear risk that schemes get caught in bottlenecks due to lack of bandwidth at administrators.
Rachel Banham, Partner and Head of LCP’s Post-Transaction Team, commented:
“One of the biggest challenges currently facing the pension industry is capacity within pension administrators. They are under huge pressure to deliver a number of complex and often overlapping projects across buy-ins, Pensions Dashboards and GMP equalisation.
“Our poll highlights the depth of concern from Trustees and sponsors regarding the risk of long delays and additional costs due to lack of administration bandwidth. The pressure is only set to grow as more and more schemes move to full insurance over the coming years. Schemes need to engage early with administrators and agree a well-defined, actionable plan for the work required. Specialist post-transaction support is crucial to manage this process actively and avoid cascading delays affecting overall timetables and spiralling costs.”
