Employers’ Relief from Outsourcing Pension Administration
Aon Hewitt recently published a survey that indicates the fact that is slowly becoming a reality – a lot of employers are outsourcing their pension administration to third parties. Whether or not this is a good thing lies in the benefits that these employers can secure from such activities. With 75% of the employers interviewed giving affirmative responses to this case, it seems crowd sourcing is indeed a viable option. This is of course when you consider the fact that this represents an increase from 69% last year.
Over 300 employers were interviewed in this report, with a combined asset value of £97 billion in their portfolios. This is drawn from an employee base of more than 2 million. There has been a decline in the number of members in defined benefit pension schemes, and this is one of the reasons why employers see it fit to outsource such administrative responsibilities to those who are able to handle them with ease. It is no longer viable for employers to have an in-house department that handles the pension schemes, and those employers who do so are on a stringent budget.
There are several concerns however that came up in the survey, including the fact that more than 40% of the employers are uncertain about the options that their employees have in as far as opting out on such pension schemes is concerned. This would therefore cause a significant burden on the communication and administrative departments.
More than 50% of the respondents in the interview indicated that they do receive other services from their outsourcing contractors besides the administration of the pension accounts, probably a means by the contractors to keep their services for longer in a world where outsourcing is fast becoming a cut throat business.
Smaller companies or pension schemes usually outsource several services to a single provider, though around 14% of the larger schemes do this.
More than 75% of the employers are so happy with the results that they get from such contractors in as far as pension administration is concerned and their ratings for such services are either excellent or good.
Whether or not you will decide to outsource some of your business is a decision that you can make depending on the circumstances upon which you are operating. However this decision carries with it risks, which indeed are unavoidable by all means. Risks can be managed, especially if you are looking to succeed with an outsourced unit. One of the easiest ways of managing such risks is to make sure that you are able to select your providers carefully. You should have a set minimum skill requirement for this and at the same time you will have to be very keen on the details that you need. You should outline the project properly so that you can also be able to get it done within the budget requirements that you have in mind.
According to Colin Hamilton, Commercial Director for Benefits Administration with A on Hewitt, most surveys indicate that the main propelling factor behind outsourcing is the cost. However there are several surveys that indicate that there is so much more to it than cost savings.
– Back Office Pro