The Pensions Administration Standards Association (PASA), the industry body set up to promote and improve the quality of pensions administration services for UK pension schemes, has updated its guidance on administration transfer exit agreements following concerns about the smooth transfer of administration services when trustees wish to change providers.
Aims of the guidance
The guidance aims to address three key problems identified by the PASA through its experience on administrator handovers: (i) delays; (ii) unreasonable charges; and (iii) the deterioration in service. The guidance notes that an exit agreement should clarify:
- the terms on exit, including service level agreements for provision of information and data, and stated responsibilities;
- the scope of services covered; and
- fees, including any additional out of scope charges and the charge rates applied.
Template exit clauses and the Code
The guidance includes template exit clauses, which can be used as a schedule to an existing administration contract, a schedule within a new administration contract or as a checklist for trustees and administrators to check that their own exit agreement includes all recommended aspects.
It also includes the PASA’s updated Code of Conduct on Administration Provider Transfers (the Code). The Code, to which all PASA members are obliged to sign up, sets out a framework that makes clear the “responsibilities and accountabilities” of administrators, with the goal of limiting the potential for delays.
Next steps for administrators and trustees
The guidance lays out the steps administrators and trustees should take now to account for changes to the Code that are scheduled to come into force from January 2023.
For trustees:
- they should review their administration contract to be clear on the agreed terms on termination; and
- if the administration contract does not include an exit clause, consider putting one in place, or requesting a copy of the administrator’s policy for transferring scheme administration.
For administrators:
- Review, or put in place, a clearly stated policy on transferring schemes to a newly appointed administrator. This policy should reflect the Code and be provided to scheme trustees where existing contracts do not include an exit clause, and/or be available to trustees on request as a commitment to best practice on transferring administration services.
Reviewing scheme administration services
Trustees will be aware of guidance from The Pensions Regulator stating that they should have a process in place to evaluate the performance of their service providers regularly. If trustees have had the same administrator for some time, they should check that their contract remains appropriate, taking into account changes in the pensions landscape and market norms. An update may also be needed if there has been a material change in the services the administrator provides, the scheme’s circumstances (for example, following a merger or major benefit design changes) or the way the administrator is delivering the service (for example, using outsourcing options).
This guidance from The Pensions Regulator is consistent with the press release from the PASA, which encourages trustees to regularly review the terms of their current administration contracts and put exit terms in place, if appropriate, even if they do not anticipate being involved in an imminent transfer of services.
Comment
Trustees will welcome the PASA leveraging its experience to produce a helpful tool to smooth over some of the common stumbling blocks that trustees can come across when dealing with the transfer of administration services. The guidance will help to ensure that the interests of the trustees and the scheme members remain paramount, and service to pension savers is maintained.
