The word ‘pension’ does not normally evoke innovation, but like many other business sectors, the pensions industry is integrating technological advances to bring forth new solutions to increase efficiencies.
The rapid pace of technological innovation and change offers this traditional, conservative business sector the opportunity to embrace new ways of consuming pensions administration and accounting software. The traditional model of corporate IT teams maintaining, servicing and delivering an installed system to the users is now being challenged by companies looking for more innovative and cost-effective solutions.
Introducing the Cloud
Cloud hosting (‘the Cloud’) is the next chapter of pension technology – it is a powerful tool and its use in pension administration is beneficial for all stakeholders, including members, scheme administrators, trustees and corporate CIOs.
Not to get swept up in technical terminology, the Cloud is actually a metaphor for the internet and ‘in the Cloud’ refers to software applications, platforms and infrastructure that are based remotely (sitting outside the company’s own IT infrastructure usually in a data centre), which can be accessed via the internet. So why is this technology being adopted in pensions administration?
Talk to any pension administrator and one of their key challenges is the speed of response and service delivery received from internal IT systems and support. With a limit to the level of available IT resources, pension administrators end up competing internally with ‘core’ business functions that are also heavy users of IT resources. This has a negative effect on how efficiently the scheme is managed and could also divert key IT resources away from important business requirements. Those with responsibility for running pension schemes want to focus their time doing the things they need to do to their job effectively, rather than worry about managing IT.
There is often little business advantage in corporate IT maintaining pension administration systems within their own IT infrastructure. Using cloud technology enables a full transference of risk as a fully managed hosting service will have guaranteed service level agreements and will ultimately remove the headache and overheads of managing and servicing an ‘on-premise’ system. It also frees up physical office space as there is no need for IT hardware; which also has the added benefit of lowering existing corporate IT overheads, as there will be no hardware or expensive software upgrade costs going forward. In addition, this technology offers future proofing of IT architecture, giving flexibility and scalability to respond to changing business demands.
Another significant advantage of adopting cloud technology is that it can form an integral part of a disaster recovery solution, giving peace of mind to trustees and CIOs alike. Features such as automatic site failover, preserve software application uptime, ensuring guaranteed availability of the administration system as well as providing a robust business continuity process. Resilience of the network infrastructure is an important aspect of any cloud hosting service, helping to assure the high availability through having no single point of failure within the hosted environment.
Moving away from an ‘on-premise’ system, can also be a good opportunity to go ‘paperless’, getting those hard copy paper files and boxes of old microfiche records, scanned into images and uploaded into the administration system. Office space
is further freed up, operational risk is reduced as the risks from fire damage are all now mitigated with access to files available through the internet. This would also give administrators access to member and scheme documents anytime and from anywhere in the world.
It is in the interest of pension schemes to embrace new technology and to ensure that the schemes are run as efficiently and effectively as possible for trustees and members. A holistic approach lends itself when evaluating whether to move away from ‘on-premise’ models. As guardians of members’ interests, trustees must satisfy themselves that alternative deployment models such as cloud hosting services are able to provide a cost-effective and secure delivery capability against their existing arrangements. Doing more for less is the name of the game. Helping pension schemes achieve this ambition is technology when deployed in the right way.
For example, the availability of member self-service functionality aligns itself with moving to a cloud based administration service. Trustees can keep the postage costs of distributing benefit statements to a minimum through offering members an online capability to view their scheme benefits, with administrators being able to upload documents securely into the member’s own folders. Schemes providing deferred member statements could particularly benefit from utilising this type of technology as it reduces the reliance of tracking down members, especially overseas.
Technological innovation will continue. The Cloud is one of the so-called ‘mega trends’ alongside mobile and data and we anticipate its position will grow rapidly. Whilst pension schemes can choose to access such technology enhancements at any time, they are likely to face increasing pressure from companies who will be looking for trustees to acknowledge and examine the benefits of embracing ‘cloud first’ strategies within administration.