Worryingly, nearly three-quarters of schemes (71 per cent) say that the cost of managing their pension scheme has grown at a faster rate than any other business overhead. The principal reasons given are increases in professional fees, costs of compliance and changes in long-term assumptions, such as mortality rates and investment growth.
The survey did, however, find that third party administration continues to deliver cost savings. For schemes with more than 2,000 members third party administration is generally substantially cheaper by £8 to £10 per member per annum in comparison with in-house arrangements. The survey also showed that increases in scheme administration costs were typically lower than in previous years.
Like last year, however, cost savings aren’t the number one reason for choosing a third party administrator. Instead experience, specialist technical support and reputation top the list of reasons for choosing a third party administrator. And nearly all (96 per cent) of third party schemes are delivered to set turnaround times, a figure which has more than doubled since 1995 when only 46 per cent did.
Key trends for defined benefit schemes over the last year have included the decisions, by sponsoring companies, to make special one-off employer contributions (38 per cent of schemes); to increase regular employer contributions (16 per cent) and to close schemes to new entrants (nine per cent). Amongst defined contribution schemes the main action reported was the introduction of new investment fund options for scheme members (reported by 15 per cent). The survey also showed that a trend for introducing flexible retirement is also gaining momentum.
In response to the survey’s findings, Mike Addenbrooke, managing director of Capita Hartshead, commented: “The survey shows a lot of the trends that were identified in last year have continued, with further closures of defined benefit schemes, and a corresponding increase in the number of defined contribution schemes. One positive factor highlighted by this year’s survey is that increases in administration cost, which had soared in last year’s survey, returned to more comfortable levels, and, for all but the smallest schemes, third party administration continues to provide substantial cost savings.” -ends-
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Notes to editors:
The fifteenth Annual Pension Scheme Administration Survey report commissioned by Capita Hartshead and undertaken by Underline Marketing and Research, is based on the responses made by 271 occupational schemes. Schemes that responded are, in the main, amongst the larger UK schemes, managing pension fund assets exceeding £222 billion with a total membership of close to 6 million lives - a significant proportion of the members presently covered by UK occupational schemes. The sample represents public and private sector schemes holding around one fifth of total UK pension fund assets and a number of large unfunded arrangements.
Non-media enquirers can request copies of the survey by emailing jo.fearne@capita.co.uk
Capita Hartshead is the leading provider of specialist administration, consultancy and specialist delivery solutions to the Life and Pensions industry. It provides an individually-tailored pension scheme management and administration service with a range of options including actuarial and consultancy services, scheme accounting, member communications, benefit payments and payroll, trustee training and company secretarial duties. The recent acquisitions of Higham Dunnett Shaw and Aspen have added a wide range of business solutions to this capability. Capita Hartshead also publishes an Annual Pensions Administration Survey.
Further information on Capita Hartshead can be found at: www.capitahartshead.co.uk
The Capita Group Plc is the UK’s leading provider of integrated professional support service solutions. The Group’s service capabilities encompass customer services, financial services, human resource services, software services, systems and strategic support and property services delivered to both public sector and private organisations. With over 29,000 employees at more than 300 offices across the UK, Ireland and India, Capita is quoted on the London Stock Exchange (CPI.L), and is a constituent of the FTSE100 with revenues for 2007 of £2,073 million.
Further information on The Capita Group Plc can be found at: http://www.capita.co.uk