Mercer research: Half of employers expect to outsource pension administration

Almost half (45%) of employers are expecting to outsource the administration of their pension schemes over the next three years, according to research by Mercer and Chatham Partners. 

The research, from a poll of a cross-section of large private and public sector organisations, also found that a further 10% expressed interest in doing so in the longer term.

Interest in outsourcing is stronger in Europe than in the UK, with 58% of European respondents planning to outsource in the near future.

In the UK, the main driver for outsourcing is the closure and wind-up of defined benefit (DB) schemes, followed by the management of increasing costs and coping with the impact of regulatory changes.

In the rest of Europe, the factors are more evenly balanced between cost management, regulatory changes and changes in plan design, together with the improvement of HR services to employees.

Access to better technology is an additional factor affecting decisions to move in-house administration to external providers in both the UK and the rest of Europe.

Jonathan Mindell, head of outsourcing for Europe, Africa and the Middle East (EMEA) at Mercer, said: “In a worsening economic climate, we see organisations looking for ways to manage their pension liabilities.

“Outsourcing to pension specialists should minimise the risks of regulatory non-compliance, provide fixed-fee certainty, and ensure that investment continues to be made in the latest processing technology and online member services.

“In the UK, the closure of defined benefit schemes has focused employers’ minds on the long-haul process of asset-value assessment, data cleansing and other time-consuming administrative tasks, and the excessive workloads these will pose for the smaller in-house teams.”

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