Pension Trusteeship: Careful documentation is key to successful admin changeovers

23 January 2018

By Kathy Turpin

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During an administration transition, the aim for the trustee is to have a clean, open and honest handover, efficiently managed.

A common view, and one that I share, is that issues that have occurred up to the point the scheme has moved to a new provider remain the responsibility for the incumbent provider to fix, or to pay for the new provider to fix. Handing over the administration to a new provider is not a way to get out of responsibilities.

"Trustees should watch out for hidden problems that the incumbent provider may not be open about"

Pay attention to provider agreements

One of the first actions that will be needed is to agree documentation. The trustees' legal advisers should be asked to review these documents.

The termination letter is crucial – make sure that any notice period and other requirements in the incumbent’s agreement are taken into account when advising them that they are being replaced.

The exit agreement is also important. It is usual for the incumbent provider to seek an exit agreement that confirms additional fees for work they will undertake to facilitate the handover.

While such fees are to be expected, trustees should take the opportunity to include in the agreement service level agreements for handing over data, member files and responding to queries. In addition, they should include requirements for quality and completeness of data and member files. There should be an impact on the termination fee if the incumbent fails to meet these requirements.

Another key document is the letter of intent. The new provider’s administration agreement is likely to take some time to review and agree, so a letter of intent will be required to enable the project to start.

The administration agreement is also needed. 

The implementation project

When selecting the new provider, the trustees will have considered the strength of the new provider’s implementation team. It is worth checking that the team the trustees were told would be working on the project are actually working on it.

Following the kick-off meeting, there should be regular meetings and telephone calls taking place weekly or fortnightly, depending on progress. There should also be formal reporting and sign-off against a detailed project definition, agreed with the trustees.

The list of possible problems during a changeover is not exhaustive, but there are several key things that trustees should look out for.

Keep an eye on the levels of resources being deployed by both the incumbent and new provider, because these can sometimes slip as other calls on resources emerge during the project.

Trustees should also watch out for hidden problems that the incumbent provider may not be open about.

When a scheme moves administrator, there is a temptation not to concentrate on day-to-day work. Trustees should seek increased reporting on backlogs.

In terms of missing member correspondence files, trustees must check that these files are complete as historic records may have not been scanned or not filed against members.

Document issues during implementation window

At the end of the implementation project the new provider should provide a report to the trustees setting out, in detail, the state of the records and anything that could impede the on-going administration. This should highlight issues that have been identified and anything not fully resolved.

It is also in the interests of the new provider to capture and document any issues or concerns they have during the implementation window because, immediately after the scheme has gone live, any problems that come out of the woodwork become the responsibility of the new provider.

The trustees will also finalise matters with the incumbent administrator. The exit fee will need to be considered against the stipulations the trustees agreed at the start of the process on response times and quality of delivery, for example.

Action points 

  • Define the project clearly to cover documentation and implementation
  • Be mindful of potential handover issues
  • Get a report from the incoming provider capturing any concerns during implementation

This article was first published in Pensions Expert

 

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