Fixed pension administration costs are preferred choice

Half of pension schemes would prefer fixed administration costs.

According to Capita Hartshead’s 16th Annual Pensions Administration Survey, while 31% of third-party administration clients are on a purely fixed-price contract, 50% said that this would be their preferred approach.

The next most popular charging model was a per capita cost plus a management fee, with 27% of schemes having this arrangement in place and 42% saying this would be their preference.

The survey also found that while administration costs have increased over the past 12 months, the pace of increase has slackened for most schemes. In-house administration is still more expensive than third-party administration for larger schemes (those with 2,000 plus members).

Unsurprisingly, the very largest schemes (with 10,000-plus members) pay, on average, the least per member for administration and also stand to make the greatest savings from outsourcing.

While costs are important, they are not the key factor in choosing a third-party administration provider. The most important factor is the experience of the organisation, with specialist technical support coming in second place. Third on the list is a robust governance framework, which has moved up from sixth place last year, reflecting the increased focus on scheme governance. Cost came fifth on the list, following reputation.

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Debbie White, sales and marketing director at Capita Hartshead, said: “We have always worked with our clients to make sure that they have a clear fee structure that suits their circumstances. For many trustees it is increasingly important that they understand and can plan for, their administration costs, with no fear of nasty surprises.”

The survey covered 288 UK pension schemes with assets in excess of £220bn and over 6.3m members.