Pension scheme administrators have a “crucial” role to play, The Pensions Regulator (TPR) has said, sharing plans to change its regulatory approach to work more closely with administrators.

In a blog post, TPR interim head of relationship supervision, front line regulation, Cliodhna Judge, said that new policy initiatives and unforeseen challenges have put the importance of good administration back in the spotlight.

And whilst Judge acknowledged that pension scheme trustees are the first line of defence, she clarified that “ administrators also have a crucial role to play”.

In particular, she said administrators play an "integral" role in ensuring that schemes hold good quality data, which is "key to improving the accuracy of annual benefit statements, valuations and membership data, and is line with our expectations for trustees".

Given this, she confirmed that TPR is looking to expand its work with pension administrators, currently covering around 10 per cent of the pensions administration market, representing around nine million members in 1500 schemes.

Under the new approach, TPR will look to establish open, two-way relationships with a number of strategically important pension administrators to understand the challenges and tackle the risks.

Judge stated: "We’re tackling the risks of poor administration, driving up standards, promoting best practice (or identifying areas where guidance would support standards) and learning more about the core challenges and issues third party pension administrators handle on a regular basis.

"These include responses to cyber security incidents, resourcing issues, the recruitment and retention of a skilled workforce and the management of data quality.

"This insight, which builds on our existing work on trusteeship and value for money, is helping us support and influence the administration industry to make improvements to standards, build confidence in the pensions system and ultimately protect savers."

TPR created its first Administrator Relationships function in January 2022, creating a team dedicated to engaging directly with third-party pension administrators to extend the regulator's reach and influence.

The regulator also undertook a pilot with a voluntary administrator to explore potential risk areas and the level of burden this approach could have.

As part of this, the pilot administrator received a report on areas to consider for business change. These included enhancing internal checking processes, recognising the need for a clear IT and technology plan (including the exploration of digital verification practices), and developing better communications.

According to Judge, the engagement was perceived as being mutually beneficial, with "very positive" feedback received from the administrator involved.

"It was clear the approach was seen as productive and collaborative, and not simply a tick box exercise," Judge stated.

"The pilot worked well for TPR also. We gained a better understanding of current market challenges in more detail, enabling more visibility of administration risk, and have been able to embed the lessons from the pilot into the ongoing design of the Administrator Relationships initiative."

Following on from the pilot, TPR has begun exploring a wider set of focus areas with further third-party administrators, further improving its industry knowledge and respond to emerging issues.

This includes a new focus on systems and processes, data quality, trustee focus, understanding and willingness to pay, member engagement and communication, and pension dashboard readiness.

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