The Covid-19 pandemic has resulted in many people reconsidering their personal and professional priorities, including in the pensions management industry. 

We’re witnessing increasing retirements among in-house pensions managers, some earlier than expected. Others, not yet ready to retire, continue to be ‘lured’ to the other side of the fence, taking roles at professional services firms, as indeed have I. 

As a previous in-house pensions manager with 20+ years’ experience, I’d like to consider whether outsourced pensions management might be the right approach for companies who find themselves faced with an unexpected vacancy or a desire for a fresh perspective.  

Where vacancies arise, companies may now be reluctant to recruit a new full-time internal pensions manager, particularly in the short term while uncertainty remains over the outcome of the pandemic. 

The first option for a company in this position is to pass the pensions manager’s responsibilities to other employees within the firm. This means that pensions work is likely to land with colleagues responsible for HR, Payroll or accounting - professionals who have significant existing roles in their organisations and who aren’t pensions experts. 

This inevitably leads to a significant proportion of the time they are able to devote to pensions being spent dealing with compliance and regulation, rather than thinking strategically and being member-focused.

A second option is to spread the in-house pensions manager’s role across several of the existing advisers. In my experience, this is generally the least cost-effective and pragmatic solution. Whilst it should at least ensure that the scheme meets minimum compliance standards, the approach tends to be fragmented, with a lack of strategic oversight and planning and a focus on compliance rather than improving the overall member experience.

The third option, which I would like to explore here, is to appoint an outsourced pensions manager.

Appointing an outsourced pensions manager will mean that the scheme is managed by an experienced pensions specialist for whom the pension scheme always comes first and who is the central point of contact for all pensions matters. In that respect, the experience for both the company and the members should be very similar to that of having an in-house pensions manager.

However, having an outsourced pensions manager can also bring additional benefits. For example, an outsourced pensions manager should have access to the expertise of a wider team of people with different knowledge and experience, and to the latest thinking on governance and risk management solutions. 

Outsourced pensions managers are also likely to have a wide network of contacts across advisers and professional trustees, and to be able to introduce them where appropriate as possible suppliers to the scheme. 

At the same time, outsourced pensions managers who are independent of third-party advisers/suppliers can provide independent challenge, and where required can get involved in managing performance and promoting greater accountability.  

Some companies might have reservations about how engaging with a third-party supplier to fulfil this key role might unsettle their corporate culture, their relationships with trustee boards, and the employee value proposition. These are certainly valid concerns, and companies need to be confident that the outsourced pensions manager fully understands these issues.

A detailed understanding of the sponsor’s business needs, employee reward strategy, and cultural dynamics is paramount to the pension manager’s success. A good outsourced pensions manager should therefore work closely with the sponsor, internal colleagues, trustees and third-party advisers, guiding and driving forward journey plans and ensuring best practice and outcomes.  

So, might the professional outsourced pensions management model be an answer for the employer without an in-house pensions manager? 

Where the outsourced pensions manager can address the crucial points about company culture raised above, I would say a resounding yes: outsourced pensions managers can add significant value, bringing deep expertise and specialist support as well as best practice, robust governance frameworks and a proven ability to balance contradictory concerns, whilst remaining member-focused. The model can also mitigate key man risk and cost uncertainty. 

We are all – trustees, sponsors, pensions managers or advisers – aiming for the most robust and effective governance framework for our pension schemes and their members. I believe this is exactly what an outsourced pensions manager model can provide. 

I’d welcome your thoughts on and experiences of outsourced pensions management, so please don't hesitate to contact me.

For more about George's background and for full contact details: George Norval

Content as published by mallowstreet on 10th August 2020