More than one in four or 26 per cent of large employers are looking to bring in outside expertise to help manage their pension schemes in the next twelve months, according to Ross Trustees.
According to research conducted among more than 500 top business executives in the UK who are in charge of large organisations with more than 250 employees, the main forces behind this move are tighter budgets and an increase in pension regulations.
Nearly two in five employers who currently oversee their corporate pension plans in-house want to outsource this duty over the course of the next five years. Over 3,000 additional enterprises may adopt outsourcing in the coming years, signifying a shift in how pension schemes in the future will be managed, with 25 per cent of large corporations already doing so.
Over the next five years, up to 5,500 firms, or 54 per cent of the 10,000 major enterprises in the UK, may outsource the management of their pensions function, according to the most recent government statistics.
According to experts at Ross Trustees, many schemes seek outside assistance to take advantage of specialised knowledge and assistance in navigating changes in the pensions sector, adding to the assurance that standards are being upheld. This can be used for ad hoc pension projects as well as adaptable support for continuing pension management.
Employers must also deal with high rates of staff turnover, which causes gaps in internal specialisations and makes it difficult to find talent to replace departing employees. With official figures showing that there are at least 53,000 job openings in the financial and insurance industry sectors, the number of openings is at its highest level since 2001, the UK has seen an extraordinary change in employment trends.
With almost a quarter of large companies’ pensions management affected by personnel attrition over the past year, businesses are growing more concerned that they will find it difficult to replace their internal pensions managers if they quit or retire. According to the poll results from Ross Trustees, 8 per cent of large companies haven’t thought about what they’ll do if their present pensions manager retires or vacates.
Due to the low unemployment rate, more than 25 per cent of businesses have indicated that they will seek outside assistance for their pension management strategies. This will help them avoid a potential skills gap and guarantee that requirements are satisfied.
Ross Trustees experts advise companies to make sure they are completely prepared for the future because the pensions industry is currently under regulatory scrutiny due to shifting pensions governance requirements and enforcement policies.
Ross Trustees trustee director Geoff McKenzie says: “Our findings demonstrate that increasing numbers of employers are looking to outsource their pension scheme management when looking to fill vacancies, anticipating that almost two-thirds will do so over the next five years. This is also reflected in our experience with some of our existing clients.
“This represents a shift in how businesses are needing to respond to today’s economic and employment challenges and the implications for pension schemes. External expertise not only provides employers with the comfort that their pension schemes are managed by experts who can maintain pace with changing regulations but also alleviates possible staffing continuity issues.
“As part of an outsourced solution, a team of skilled individuals is in place that can flex in to provide solutions, with specialists able to assist with particularly complex situations as needed.
“Businesses which look to external providers may find themselves better prepared for the future should their current in-house pensions team move on.”