The Pensions Regulator (TPR) has urged trustees and administrators to work together to deliver even higher standards of administration and help achieve better outcomes for savers, warning that despite signs of progress, challenges remain. 

TPR made the comments alongside the findings from its year-long engagement with 15 pension administrators, which highlighted the growing importance of administration, with "encouraging" signs of progress, as many admin firms are becoming more strategic and resilient. 

In particular, TPR's report suggested that while the perception of administration as a low-margin and low-value function is now changing positively, and most of the third-party administrators spoken with are now profitable.

TPR found that, with increasing demands on administration, pension administrators are modernising systems and rethinking service delivery, with growing investment in AI and digital tools.

There were also improvements in risk and change management, as TPR found that many administrators use clear governance models, and that responses to change are no longer just reactive, as many administrators now have dedicated teams to manage it properly.

However, TPR found that key challenges remain, particularly around changes to regulatory requirements, technology, staffing, data, and cybersecurity.

Indeed, although TPR acknowledged that the market is now seeing increased investment in technology upgrades, AI, and people, it argued that much more work is required.

Finding and retaining experienced staff, especially for defined benefit schemes, was one key challenge highlighted by the report.

In addition to this, TPR argued that although efforts are underway to modernise and integrate systems like administration, payroll, and member portals, outdated systems remain a significant challenge, and improvements are being held back by limited budgets and the need for competitive pricing.

Given this, TPR stressed that continued technology investment and strategic planning are "essential" to overcome existing barriers to deliver more effective and efficient services.

"A collective industry effort is needed to raise the profile of administration to secure the recognition and investment it requires to meet growing demands and member expectations, and to prepare for the significant upcoming regulatory and legislative changes, including pensions dashboards," it stated.

Indeed, whilst member engagement remains low, especially in DB schemes, TPR said that it expects pensions dashboards to increase member interest and engagement, with a likely increase in member expectations of the administration service as a result.

It therefore encouraged trustees and administrators to plan the likely impact of dashboards and consider whether their current administration service, member engagement strategies and member interaction channels are likely to remain effective and be capable of handling the significantly increased demand.

Data also remained a key concern, as TPR found that many administrators continue to struggle with poor-quality data, which hampers automation and can lead to mistakes and delays.

But TPR said that technology improvements mean that maintaining data quality is now easier, arguing that, in the future, both trustees and administrators need to appropriately focus on and invest in their data.

Commenting on the report, TPR interim executive director of market oversight, Julian Lyne, said: “Administration remains central to good saver outcomes and so we welcome these improvements. But more work is needed to reach the standards we expect. 

"Investing in technology and new skills, improving data, pushing for better governance and transparency, and strengthening resilience to cyber-attacks, should help reduce risks and improve outcomes for savers.

“We expect administrators and trustees to reflect on these findings and work together to identify ways to improve administrative practices to better serve savers. As the market evolves, trustees must take greater responsibility and accountability for ensuring those improvements happen.”

TPR is also taking steps to support the industry in these efforts, confirming that it will be developing a new administration strategy, whilst also continuing direct engagement with administrators, and updating its administration guidance setting clearer expectations for trustees. 

In addition to this, TPR said that it will look to promote further collaboration and transparency between trustees and administrators, collaborating with the industry and looking at actively participating in industry working groups, and advise government on future legislation. 

The regulator said it will share more details about this strategy in due course.

The plans were welcomed by industry experts, with the Pensions Administration Standards Association (Pasa) arguing that administration is an area " too often undervalued despite its direct impact on saver outcomes". 

"We look forward to working closely with TPR, trustees and administrators to continue driving improvements," he said. "Ultimately, good administration underpins trust in pensions and that’s what matters most for savers.” 

PASA president, Kim Gubler, echoed this, stating: “We’re seeing encouraging improvements in administration across the market, but those improvements need to be more consistent and crucially, they need to be maintained. 

"Savers deserve a reliable and resilient service, and it’s essential administration standards
don’t just improve in response to regulatory pressure but become embedded as part of day to-day best practice.”

Brightwell head of admin consulting, Michelle Esterkin, also agreed on the need for change, arguing that "strong administration is the backbone of the pension system, integral to effective scheme management and member satisfaction but it has suffered from lack of investment".

“With increasing regulatory demands, technological transformation, pensions dashboards and rising member expectations, administrators have never been more important," she continued. 

In addition to this, Aptia UK president, Malcolm Reynolds, said: "We support TPR’s call for stronger collaboration between trustees and administrators, recognising the critical role of administration and the need for continued investment in technology, data quality, and cyber resilience.

"For too long, administration has been seen as a low-margin, back-office function, resulting in chronic underinvestment. We are pleased to see this perception shifting at last.

"We welcome TPR’s commitment to a new administration strategy and look forward to contributing to future working groups and sharing innovation through its Innovation Support Service to help raise standards and improve outcomes."

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