Time to get rid of the manual

by Graham Newman   •  

When I started out as an actuarial student around 20 years ago, nearly everyone used ‘state of the art’ desktop PCs. Today’s students would have a laugh at the size of these big chunky machines, which took up about a third of our allotted desk space with the monitor taking up another third. The remainder was paper!

Now we have sleek, lightweight laptops and smartphones. We’re wireless and paperless. The technology on our desks has moved on beyond our wildest imaginations and has way more computing power than the rockets that first took man to the moon. So, why is it that the systems we use to value defined benefit schemes still seem so archaic? Something to ponder.

But first, let’s return to my trip down memory lane.

Not joined up

When it came to running actuarial valuations in the early noughties, I remember being buried under reams and reams of paper. Back then, member data came in hard printed copy. Difficult-to-read dot matrix, of course.

  • The data needed to be typed into an Excel spreadsheet, all under the watchful eye of a winking and smiling paperclip icon asking if we wanted help to create our spreadsheet. It took hours.
  • Then the data was analysed for errors or gaps. It took hours.
  • Next the data had to be updated as the results of investigating the data queries trickled in. It took hours.
  • The data then had to be formatted – precisely – so it could be sent across to another completely different system to run the actuarial valuation liability calculations. It took hours.

The amount of manual intervention at each stage was staggering. And then we got to do it all again in three years’ time. Wonderful. I believe the appropriate simile is ‘like painting the Forth Road bridge’.

As technological power increased, so did the capability of the administration systems that held the member data and the actuarial systems that calculated the liabilities. But they remained very separate and continued to rely on ongoing manual intervention. It felt as if we now had the technological power, but we didn’t know how to harness it or develop it in a coherent manner.

Even today, many schemes are still struggling. The result is that vast inefficiencies remain, with trustees and their advisers running around simply trying to work out what is going on with their schemes, rather than focussing on high-value strategic matters. Members too expect quicker than ever access to details of their potential benefits, which further adds to the strain.

Just imagine …

Automation is a bit of a buzz word. What does it actually mean? One credible definition is the use of technology to provide a service with minimal human intervention

When most people talk about automation in the context of pension schemes, they probably mean using a spreadsheet to calculate member benefit quotations, such as retirement quotations and, at a stretch, some transfer values. While the coding in the spreadsheet may not need to change, there is still plenty of manual intervention required to update the data each time, which in turn probably comes from another system altogether. This doesn’t cut it and can hardly be described as automation.  

True automation is having a single system that, once it has been set up and tested robustly, can be used for all manner of pension scheme calculations. It means building and using a system that has data and benefit specifications at its heart, with a full suite of functions flowing from there. For instance:

  • Imagine member benefit quotations being available at the push of a button – the administrator doesn’t need to know members have even looked at their benefits.
  • Imagine members being able to take a transfer value, or even process their own retirement, using no more than a tablet or smartphone.
  • Imagine accurate actuarial valuations and Asset Liability Models being accessible to trustees, sponsors and advisers in real time, on whatever day they are needed.
  • Imagine scheme accounts being prepared automatically and the supporting historical information being available to auditors at the same time.

There’s no need to imagine – this is real and available now.

It’s not rocket science – it’s automation

Harnessing technology through automation allows for a much improved member journey, with easy access to more information and improved decision making.

Trustees, sponsors and advisers are better able to focus on key strategic matters rather than spending their valuable and scarce time on routine day-to-day tasks. The result is an efficiently run scheme, with accurate real-time information being available whenever it’s needed, ultimately leading to better outcomes for members, trustees and sponsor alike.

True automation is not the future – it’s out there now and will help educate, engage and empower your members. By settling for anything less, we may as well go back to the chunky desktops and reams of paper.

Further reading

Investing in future pension administrators

by Troy Ramsey   •  

The road to buyout – an actuarial perspective

by David Lucas   •  

Pandemic paves the road to DB buyout

by Matthew Masters   •  

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