Increasing member engagement and outcomes, cutting costs and coping with the ever increasing burden and challenges of regulation. These ambitious and challenging goals are within the capabilities of the European pension fund industry.
At the heart of every pension is an administration system, but these have been overlooked for too long. This is why many funds struggle to keep their systems aligned with current and future requirements.
Effective administration can bring together our shared goal of creating the best possible outcome for savers and cope with demographic, social and economic change.
Lumera believes how your scheme conducts its administration is more important than ever.
One goal: to improve all outcomes
The European pension fund industry is united in one goal: to create the best possible outcome for savers. The higher the outcome, the better everyone has been at doing their job and there are three fundamental ways pension funds can do this:
Increasing contributions
Paying more into a pension is one way of improving savers’ outcomes, but this also requires political and social solutions. Questions are still being asked: Who pays for retirement, and how much should they pay? How much should be coming from the government? How much should be coming from the employer? How much should be coming from the individual? These questions are being solved slowly but surely; this is only part of the solution.
Increasing returns
The industry works intensively alongside asset managers to maximise returns in an effective way. Parties work together on issues such as ESG as well as general sustainability across the asset management industry; however, returns are not delivered in a cost-efficient way, outcomes suffer.
Efficient administration
The third way to ensure maximum pension outcomes is to be as efficient as possible when administering a pension scheme. The long-term effect of cost on net returns is well documented yet appears to receive less emphasis than gross returns. In our view, this is a missed opportunity. Today, technology can create the foundation on which a cost-effective operation can be built.
The foundations of administration
Having an administration system which secures your member’s benefits means having three core elements in place and these are the foundations of any functional 21st Century administration strategy:
- Firstly, your system must be able to adapt efficiently to regulatory changes; which at the present time is focused on the transfer of government responsibility through to employers and to individuals.
- Secondly is to make sure you have a participant-centric approach, so your administration should be able to support member’s experience of and engagement with their savings.
- Finally, it is imperative to have accurate data. Yet, having accurate up-to-date data is one of the biggest challenges pension funds face. Without it, even the best technology will struggle to deliver.
These core elements apply to every organisation that is providing pensions administration, large individual pension funds that run administration themselves, third party administrators, insurance companies and Master Trusts, to name a few.
It’s all about data
Technology can - if deployed properly - offset risk. For example, if you have a scheme with €500 billion assets, there is a lot at stake. The raw data will drive aspects of administration efficiency because even the most thorough automation cannot deliver an accurate output if the source data is poor. Having excellent systems in place and reliable data also reduces your administration overheads. Fewer administrators are needed to oversee and correct the data you have. Also, you will avoid unwanted attention from regulators.
Having accurate data means there is less need to set aside compensation payments for incorrect policyholder and member outcomes. If you are a scheme with a sponsoring company which is looking to transfer its pension risk through a buy-out, you will certainly be aware of the need to invest in ensuring that the data items the insurer focuses on are complete and accurate before the scheme is handed over. Not having this in place can increase the cost of the transfer which will in turn impact on the benefit due to savers.
But the data mantra doesn’t just apply to de-risking, of course – sound data is fundamental to efficient administration and satisfying the needs of every end-customer.
Beyond data
Having the right administration system in place will help you reduce your costs, but it can also help you meet other ongoing challenges:
Taking control
Increasingly, people want to run their pension themselves. They have seen the capability, digitally and online, to get a quote for their car or home insurance, or to manage their bank account via an app and they will want the same for their retirement savings.
There will be frustration if a member gets halfway through the process of getting a retirement quote and then finds they have to send a message to whoever is running the administration to finish that process off.
The expectation of a more seamless digital experience can only increase, with the expansion of open banking and initiatives like the pensions dashboards in the UK.
Reform and regulation
As well as ongoing regulatory requirements there are huge shifts taking place across Europe.
For example,WTP reform came into force in The Netherlands in July 2023, with a five-year transition period giving schemes until 1 January 2028 to make their offerings more sustainable and give certainty to employees. This means schemes need to give their members more information and that data needs to be correct.
More engagement
The UK’s pension fund industry is going through a slow transition, which is expected to result in more consolidation with the aim of achieving economies of scale within pension funds. This, the regulator and government insist, will mean lower fees. The end goal is an improved participant experience and engagement, with low-cost administration key to that change in dynamics.
What Lumera does
Lumera enhances the European pension industry by boosting member engagement, cutting costs, and navigating regulatory complexities through intelligent policy administration - a vital element for meeting current and future needs.
Key strategies for superior outcomes
- Increasing contributions: Supports sustainable solutions through coordinated efforts from governments, employers, and individuals.
- Maximising returns: Partners with asset managers for efficient returns, integrating ESG and cost management.
- Efficient administration: Streamlines processes to reduce costs and elevate member engagement for long-term success.
Adapting to demographics and data challenges
With longer life expectancies and responsibility shifting to individuals, pension schemes must adapt. Lumera’s solutions ensure compliance, enhance member experience, and maintain data accuracy—essential for efficient operations.
Empowering digital solutions
Lumera’s digital-first approach supports providers with modern self-service tools and swift regulatory adaptation.
Proven impact
Lumera’s administration platforms enable confident management of DB, DC, and hybrid schemes, optimising service delivery and supporting sustainable outcomes.
Facing down the future
The European pension fund industry faces many challenges. The fact that we live longer has put pressure on governments and in turn has put more pressure on European employers and their pension provider partners. This switch from defined benefit solutions means responsibility for pensions is in all our hands. Administration can meet these challenges head on and ensure a better outcome for all of us.
Written by: Samantha Downes
