The Journey of Pensions Technology through the ages

17 March 2014

In a nutshell
  • Cloud based pension administration service is an emergent trend
  • Historic ‘lag time’ being innovation and adoption under pressure
  • Pension technology will continue to move forwards
June 2014 will see Profund celebrate its pearl anniversary in Bristol, marking 30 years of servicing and supporting its clients in managing pension schemes. 

The business started in 1984 as Microtec Management Systems in Bath, a business that ushered in a pension administration software system called ‘Profund’. It was in good company – that year Steve Jobs introduced the Apple Macintosh micro-computer (including a mouse, not wireless of course). Fast-forward to 2014, Profund (the business) has grown to 7 million occupational pension scheme members administrated on its software. From its inception as a product name to the recognised and trusted brand of today, Profund has embraced and embedded various IT technology advances into its pension software applications for the benefit of its clients in search for innovation and agility. The launch of the Profund Private Cloud in October 2013 is the latest example how the company is utilising an emergent technology trend to provide users with a different way to consume pension software i.e. pension schemes will now have a platform to move to a ‘cloud first’ strategy for their pension administration software. 

Developing and supporting pension software is capitally intensive, requiring deep knowledge of not only the underlying IT technologies but also an ability to understand the complex legislative and regulatory framework in which users of the software operate and translate such requirements into intuitive, easy to use software which is robust and reliable. Longevity is important for any business – it demonstrates pedigree, success and market commitment and provides clients with comfort that they will see a return on their monetary investment in pension technology. 

Technology timeline

During the last 30 years, a number of evolutions in IT have led to the development of innovative pension management solutions. However, the rate of adoption by schemes has lagged behind due to inertia, cost, and the seemingly never-ending juggling act to do more, with less, faster and more efficiently. The ‘Information Age’, which defines our time, means that technological developments have and will continue to occur at an exponential rate. New developments are often outdated before the finished product arrives for consumption. Hence the lag is not purely one way. 

Some notable technology innovations which had a large influence on society as well as pensions include: 
  • 1984 Apple Macintosh micro-computer
  • 1985 Microsoft Windows was first shipped
  • 1991 Tim Berners-Lee develops WWW (led to member self-service portals, new distribution and member communication channels and faster data exchange)
  • 1994 Windows based pension administration system available
The latest IT revolution in pension scheme administration

Whilst it is arguably rare for IT technology advances to be trailblazed by pension schemes, an increasingly number of so-called ‘early adopters’ are keen to embrace innovation and lead the industry in providing new solutions to increase efficiencies. Pension scheme trustees, corporate sponsors, insurers, administrators, IT and members have all witnessed the emergence of cloud computing technology outside of work, a trend that is gaining traction and popularity at a fast pace. The ‘24 x 365’ expectation and experience of how we ‘consume’ the cloud in our social lives has started to translate into the pension management space. We are seeing a great deal of demand for cloud-based services from both existing clients and new prospects, as they seek to understand the benefits of utilising this technology within administration.

Whilst the ever increasing pace of technological innovation give rise to ever better performing solutions for pension administration and accounting, the time lag often seen between technology invention and common adoption is accrued in a traditionally slow moving and cautious market sector. 

Utilising cloud technology 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, preservation of software application uptime, ensuring guaranteed availability of the administration system as well as providing a robust business continuity process, are all significant benefits of moving to such a model. 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. 

Adopting cloud technology for pension administration can be the driver for moving to a ‘paperless’ working environment, getting those hard copy paper files and boxes of old microfiche records, scanned into images and uploaded into the administration system. Office space is freed up as there is no need for the ongoing physical storage of member files, operational risk is reduced as the risks from fire damage are mitigated with access to member files available through the internet. Member service can also improve as administrators can simply reference correspondence held in member libraries on the administration system, rather than placing the member on hold whilst they search for the hard copy member file in the filing cabinet.

Likewise, the availability of member self-service functionality aligns itself with moving to a cloud-based administration service. Besides saving postage costs on communication, e.g. benefit statements and trustee report and accounts, granting members an online capability to view their scheme benefits and generic scheme documentation also reduces the volume of calls received by administration teams, helping them to focus on the increasing de-risking project related work which defined benefit schemes are engaged with.

In the corporate world, the pressure to reduce operational costs is a constant, as is the need to ensure value for money is obtained from any capital expenditure. Investing in cloud technology can support CIOs and IT directors in delivering improved efficiencies to their businesses whilst securing a faster, more responsive service delivery for the users of the pension administration software – very much a ‘win-win’ situation for all stakeholders.

Recognising that there is often little business advantage in their own corporate IT teams supporting and maintaining pension administration systems, implementing a ‘cloud first’ strategy not only achieves a full transference of risk (as a fully managed hosting service will have guaranteed service level agreements), but it enables corporate IT energies to be focused on completing ‘core’ business IT projects that create sustainable new capability rather than simply trying to sustain and run existing capability which is not progressive.

There are additional business benefits and efficiencies to be leveraged by moving away from the traditional ‘on-premise’ deployment of pension administration software. For example, additional physical office space is created as there is no need for IT hardware to be stored on site (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. Savings in management time, IT hardware, associated support & maintenance contracts and physical space also need to be factored in and can be significant. Moreover, resources can be redeployed to higher priority business projects and ultimately removing both the burden and overhead of managing and servicing an ‘on-premise’ pension administration system for CIOs and IT directors. In addition, this technology offers future-proofing of IT architecture, giving flexibility and scalability to ensure a quick and agile response to changing business demands as appropriate.

Case study – Dixons Retail plc

Creating a new cloud-based pension technology solution of which our clients could take full advantage was a key strategic objective for Profund during 2013. The team did a fantastic job in developing and implementing not only the architectural environment but a live client installation all under nine months. One business that is at the forefront of adopting cloud technology is Dixons Retail plc, which were the first client to put its pension administration in the Profund Private Cloud in
October 2013. Key benefits include accessibility, resilience and scalability in a secure environment, giving the administration team greater control and flexibility in how they manage the service delivery to members. 

Moving away from an ‘on premise’ IT delivery model enabled the Dixons pension department to realise a number of operational benefits both in the management of their pension scheme and for their pension administrators as users of the service. For example, the user experience has been enhanced through the much improved performance of the administration software. The speed is noticeably faster in Profund’s hosted environment than before, which has in turn created efficiencies in running various administration processes. The Dixons team administers both defined benefit (including pensioner payroll) and defined contribution occupational pension schemes, utilising Profund’s electronic document management software to reduce paper-based filing.

A key driver in Dixons’ decision to utilise Profund’s new ‘Private Cloud’ service was its ability to provide a substantive part of the Disaster Recovery solution for the Trustee Board. Profund’s fully managed hosted service includes an automatic ‘failover’ capability, which provides assurance to clients that service continuity will not be compromised. With Dixons being based in Hemel Hempstead, the explosion at the nearby Buncefield Oil Depot a few years ago, serves as a powerful reminder to those with responsibility for managing pension schemes that advances in pension technology can and should be leveraged in delivering the next phase of administration service delivery to pension scheme members.

Malcolm Johnson
Managing Director - Profund 0117 927 8564