Pension providers hide service shortfalls
Pension administrators now provide nearly identical core services, but pricing, operational resilience, and capacity reveal significant differences that basic comparisons overlook, a recent industry survey found.
Service lists don’t tell the full story
Providers deliver an average of 95% of 31 standard services assessed in the survey. All 15 participating firms offered at least 27, while 14 included 90% or more, indicating growing standardization in what administrators provide.
KGC Associates, which conducted the research, noted that similarity on paper does not guarantee equal performance. As administrators face increasing pressures—including pensions dashboards, GMP equalisation, regulatory shifts, and large-scale data projects—delivery quality varies widely.
Hayley Mudge, head of research at KGC and author of the survey, said the core administration role remains essential. It has become even more important as providers balance routine tasks with major projects.
“Alongside the day-to-day job of running schemes and supporting members, providers are handling major data projects, regulatory change, and other competing priorities, often using the same people and resources,” she said.
Mudge cautioned that trustees should not assume administrators with matching service lists have comparable capabilities. “A service list can tell you what a provider does. It cannot show how well equipped they are to deliver when demands increase or priorities compete.”
Capacity and cost gaps emerge under pressure
Capacity constraints were the biggest challenge for 36% of respondents, followed by AI and automation (28%), pensions dashboards (22%), and regulatory change (15%).
Digital functionality, once a key differentiator, is now nearly universal. All providers offer real-time member access, personal data management, expression-of-wish forms, and online document libraries. Most also include role-based portal access and multi-factor authentication.
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Advanced features remain uneven. Only 53% provide case tracking or secure messaging, 46% offer an online defined benefit retirement journey, and 40% support electronic signatures.
Pricing differences are significant. For a 500-member scheme, first-year administration costs ranged from £37,400 to £73,780, averaging £50,876. For a 20,000-member scheme, costs spanned £513,350 to £1.05 million, with an average of £726,811. While per-member costs decrease with scale, operating models and commercial assumptions create wide variations.
Pensioner payroll showed the most extreme pricing differences. For a scheme of that size, quoted charges ranged from £46,000 to £368,200. Exit fees were the least standardized, with seven providers offering fixed fees, five using ranges, two charging time-cost, and one not disclosing its approach.
Non-core services, such as regulatory projects or data remediation, are typically billed on a time-cost basis. GMP reconciliation is largely complete, with most providers reporting 75-100% completion.
This convergence of services may appear positive, but it hides deeper risks. When every provider checks the same boxes, the real test becomes performance under pressure—something no checklist can measure.
Resilience, not just services, matters most
Kim Gubler, managing director at KGC Associates, said trustees must look beyond service lists to evaluate an administrator’s infrastructure. “Most providers now offer very similar core services. The real difference lies in how consistently those services are delivered as operational demands grow.”
She advised schemes to examine operating models, technology reliability, and whether administrators can maintain performance when routine work overlaps with major projects. “This requires understanding the operating model, the strength of the people and technology behind it, and whether the administrator can keep delivering when regulatory change, major projects, and business-as-usual all demand the same resources.”
The survey highlights a shift in the industry. As services become more standardized, the focus moves from what administrators offer to how well they sustain it—especially during unexpected challenges. Trustees considering pension tax reform should also weigh these operational factors when selecting a provider.
