The Pensions Administration Standards Association (PASA) has warned that upcoming default retirement reforms could present a “once-in-a-generation” operational challenge for pension scheme administrators, as it published new guidance on the implications of the changes.

The guidance, Default Retirement: The Operational Challenge Facing Pension Scheme Administrators, outlines how the introduction of guided retirement duties will fundamentally reshape defined contribution (DC) administration and require significant changes to systems, processes and governance.

PASA said the reforms mark a shift away from a focus on pension savings towards delivering sustainable retirement income, meaning schemes will need to take a more active role in supporting members at retirement.

The paper highlighted that administrators will play a critical role in determining whether policy ambitions translate into improved member outcomes, warning that without early planning, operational constraints could limit the success of the reforms.

With master trusts expected to implement default retirement solutions from 2027, PASA said the industry faces a tight timeline to design, build and deliver new capabilities.

These include member segmentation, enhanced data collection, default decision-making processes, pension payroll functionality, tax processing and ongoing governance frameworks.

PASA DC Working Group chair, Jessica Rigby, said the changes represent a fundamental shift in how schemes support savers.

“Default retirement represents a fundamental shift in how pension schemes support savers at retirement,” she stated.

“The direction of travel is clear, with a renewed focus on delivering sustainable income rather than simply providing access to pension savings.

“While the policy intent is strongly supported, delivery will be complex. Many existing administrative processes were not designed for ongoing retirement journeys or income provision, and significant change will be required across systems, data and operations.”

Rigby also stressed the importance of early collaboration across the industry.

“Early engagement between trustees, administrators and providers will be critical to ensure solutions are deliverable, scalable and aligned with member needs.

“Without this, there is a real risk that operational challenges could constrain what can be achieved in practice.”

The guidance identified several key risks, including system strain, data quality challenges, increased operational complexity, and the need to better support vulnerable or disengaged members.

It also warned that current DC administration models, which are largely designed to process member choices and close records, will need to evolve to support ongoing retirement journeys, including running payroll, managing tax and monitoring outcomes over time.

PASA chair, David Fairs, added that the reforms reinforce the growing importance of administration within the pensions system.

“These reforms reinforce the growing recognition of administration as a critical enabler of good member outcomes,” he said.

“Administration is no longer a back-office function; it sits at the centre of delivering policy intent and supporting savers through increasingly complex retirement journeys.

“The industry has an opportunity to demonstrate its strategic value, but this requires realistic planning, investment and collaboration.”

Fairs stressed that administrators must be involved early in decision-making to ensure proposed solutions are deliverable.

“This paper provides a timely reminder that success will not be judged by design alone, but by how well these changes work in practice for savers,” he noted.

The guidance also set out a series of actions for administrators, including assessing system readiness, engaging with trustees, exploring delivery models and strengthening communication strategies.

PASA said it would continue to work with industry stakeholders to support the development of practical solutions as further regulatory details emerge.

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