The average administration cost per member is 190% higher than the costs charged by small scheme specialists
|Specialist Administrators for small schemes, provide the best value.
The 11th annual survey of Defined Benefit (DB) pension scheme costs by KGC associates shows that the average cost of administering a scheme with 200 members is over £28,000 pa with the highest provider charging c£47,000 pa.
The same survey shows that the firms who specialise in providing services to small schemes charge £13,300 pa.
The survey also shows the number of specialist small scheme providers has shrunk in the last 12 months through consolidation.
Rob Dales, Director at Atkin Pensions says “The average administration cost per member is 190% higher than the costs charged by small scheme specialists. Employers and trustees are paying money in fees that could otherwise be directed towards fully funding members’ pensions.”
Specialist small scheme providers give a more personal service and are less likely to be charging for extras with their fixed fees covering all services needed to provide administration.
Between each actuarial valuation a small scheme could conceivably be paying over £45,000 more than is required to ensure the scheme remains compliant and pay members their pension. This is money that could otherwise go to improving the employers covenant or reducing the length of recovery plans and improving the security of members’ pensions.
Rob Dales, Director at Atkin Pensions says “small schemes usually have similar problems as larger schemes but without the same resources to throw at them and therefore need a more personal and practical approach”.
Many commentators believe that consolidation could be a key part of the solution to the challenges facing small DB schemes as it can help bring about economies of scale and improved governance.
Rob Dales says “Pooling of resources does introduce economies of scale but this is of little benefit to smaller schemes as the specialist small scheme providers already provide these cost savings without the loss of personal service for both the trustees and members.
There is also a danger that, in these pooled arrangements, Trustees (and their sponsors) lose control and therefore risk being dictated to and having to accept less than optimal solutions. We have seen numerous examples of this, including advising companies who participate in Local Government Pension Schemes or companies that have left master trust arrangements”
To obtain a copy of the survey, please visit Surveys – KGC Associates Limited or send an email to email@example.com. To learn more about how this can impact on smaller schemes and what the alternatives might be, then please give me a call.
Rob Dales FIA
M: 07799 094392
T: 0121 506 8200 F: 0121 506 8201
Cornwall House, Blythe Gate, Blythe Valley Park, Solihull. B90 8AF