What is automation in pensions administration?
Automation in pensions administration is a phrase that’s banded around a lot. It is easy to imagine automation in a manufacturing environment (think robotics arms in car assembly). But what about a complex world like Defined Benefit pensions administration?
What is automation? And, importantly, what is it not?
Whilst not about robotic limbs, it is about getting things done without human input. Generally, automation in pension administration is seen as a good thing. This is because it usually makes things happen quicker, removes cost (of people), and if done well, reduces errors and makes the pension scheme member experience better.
We want lots of it, right? Well, yes, we do. For all of the reasons above, for all necessary tasks, we do want automation.
However, widely differing cost ranges throughout administration suppliers may suggest the industry has not yet taken full advantage of all potential routes to automation. And yes, automation provides consistency and efficiencies, but I strongly advocate for automation only where appropriate. I will even go so far to say that there are instances where automation is not the best option. Shocking, I know!
The automation process of a transfer value request
Let’s explore an example.
One of the most common tasks performed in pension administration is completing a request for a transfer value. Transfer value requests account for around 5% of all enquiries. This is a small number in isolation but equates to hundreds of thousands of pieces of work a year across the industry. What does this straightforward process look like?
In this example if a member phones or writes, the first two stages cannot be automated. The member has definitely been involved in making the request, and an administrator dealing with the request has had to manually input it into workflow (even if the process is received and completed by the same handler, as they will need a record of the completed task). Automation can then break down at stage 3, the production of the quote. If the quote is automatically generated without off-system calculations – that would be automation. If it’s not, then it’s not.
And onto stage 4, the system now has the quote whether created automatically or by an administrator. How does it get issued? If it is digitally sent to some form of fulfilment, that is automation, “post out” trays are not!
If the member contacted their administrator electronically through a web portal or smartphone app, viewed an accurate quote (because the calculation was automated) and requested the quote to be sent to them with the touch of a button, it is possible to automate this process end to end.
Member requests the quote, workflow is auto-created, quote is produced and sent to fulfilment without any human hands. Fast and accurate and a great member experience. A very valuable automated process that ticks all the boxes.
The limits of automation: Handling critical decisions with care
But what if a member wants to act on that transfer value?
Maybe this is where we start to question whether we really want to automate everything, especially life changing decisions like a transfer of a DB pension. Clearly there are parts of a transfer out than can be automated but checks and balances and scam protection also need to be put in place. Thankfully transfer quote requests significantly outnumber actual transfers, therefore much of the administration effort can indeed be automated in a way that brings lots of member benefits.
Striking a balance between automation and human touch
So, when your administrator claims they are automating, assuming they are not talking about a monkey crashing cymbals, ask them to write the process down and explain exactly what is and what is not automated. You might find some surprising opportunities, or equally identify places automation should be removed to make space for the human touch.
Start the conversation today to optimise your pension administration and enhance your members’ experience.
