Why do trustee boards use outsourced pension management?

3 Jul 2023

An ever-increasing number of defined benefit and hybrid pension schemes are closed to future accrual – meaning in-house pension teams become smaller and the role of the in-house pensions manager has become a last-man standing role. Despite the legacy offering not being part of the current benefit package, there is still a significant amount of regulatory duties to meet – this is not a job that is shrinking in importance. Trustee boards are struggling to balance a limited talent pool with increasing regulatory responsibilities. Couple this with the key person risk that trustee boards need to mitigate and it’s easy to understand how the role of outsourced pensions manager was born. All of our clients using our Trustee Executive solution tell us that these are key benefits they get from outsourcing pensions management

1. Specialist Knowledge and experience coupled with capacity

Outsourced pensions managers bring a formidable amount of both expertise and capacity to the table. With dedicated teams brimming with in-depth pensions knowledge and understanding – they are able to support with increased governance, investment strategies, risk management, additional resource, regulatory and compliance changes and insight into industry best practice.

2. Improvement to operational infrastructure

When you utilise third party suppliers you get the benefit of their infrastructure partners and outsourced pensions management is no exception. Whether it’s robust technology, improved risk management systems or advanced record-keeping. The role of outsourced pensions manager can often bring more than the external expertise and additional capacity delivered by an individual. Providing access to preferred technology partners, independent of the sponsor, able to manage meeting cycles and store key trustee documents and actions is a key benefit.

3. Risk management and regulatory compliance

Trustee boards are wholly responsible for the compliance of their scheme – and the complexity of the pension regulatory landscape is not getting any easier. Trustees need to establish effective risk management frameworks, robust policies and ongoing compliance, this is where the skills of an outsourced pensions manager can add enormous value – this is their BAU.

4. Independence

In a world of vertical integrations, the true value of independence is hard to quantify. When outsourced pensions management is delivered free of any other adviser service trustee boards gain a mass of experience and technical knowledge, whilst adopting best practice and good governance. When independence is at the heart of the role it can act as a trusted link between the trustee board and its advisors, with the sole focus being to work in the best interests of the trustee boards.

5. Reducing direct costs for sponsors

Sponsors can cap the headcount and costs, internal HR teams can reduce their governance burden and regulatory requirements – such as the submission of Scheme Returns and Notifiable Events to The Pensions Regulator, filing to Companies House, and the compliance and publication of the Chair’s Statement (to name a few) are all taken care of.

Why are trustee boards outsourcing their pensions management role?

Outsourcing pensions management allows sponsors and trustees to align objectives. The many merits include mitigation of key person risk, increased capacity, and management of costs.

What next?

If outsourced pensions management is something you’d like to know more about you can reach out to Lindsay Hawkins - a Director at Muse that heads up the Trustee Executive Services team who is always happy to have an informal chat: [email protected]