Introduction
The pensions industry is at a turning point. Pension administration, once seen as a back-office function, is now recognised as a critical driver of good outcomes for savers. With increasing regulatory demands, technological transformation, and rising member expectations, the role of administrators has never been more critical.
Recognising this shift, in September 2024, we launched a new phase of our voluntary engagement initiative with different types of pensions administrators. Our aim was to deepen our understanding of the risks and challenges they face, and to identify ways to support improved outcomes for savers. These engagements provided critical insights, helping us inform our strategic direction for improving administration standards across the pensions industry.
Over the past 12 months, we engaged with 15 pension administrators across a range of sizes, ownership models, and service types, including third-party administrators (TPAs), and in-house teams. These administrators operate in both defined benefit (DB) and defined contribution (DC) markets, and their varied approaches reflect different growth strategies and operational challenges. We would like to thank those who worked with us; they showed willingness and transparency to support the initiative which has been instrumental in broadening our knowledge.
Our engagements focused on four key themes:
- Financial sustainability
- Technology and innovation
- Risk and change management
- Cyber resilience
This report shares the key insights we identified through these engagements. It aims to support those involved in administering occupational pension schemes and to highlight opportunities to strengthen governance, service delivery, and savers’ outcomes.
Financial sustainability
A strong and financially stable pension administration market is vital to protect savers and support innovation. We looked at how administrators are preparing for the future. We found active investment in operations, ownership structures, and refinement of business models to meet future demands.
Shift in how administration is valued
The perception of administration as a low-margin and low-value function has long contributed to consistent underinvestment. We found that attitudes are now positively changing and most of the third-party administrators we spoke with are now profitable.
After years of underinvestment, the market is now seeing increased investment in technology upgrades, AI, and people, however more work is required. A collective industry effort is needed to raise the profile of administration to secure the recognition and investment it requires to meet growing demands and member expectations, and to prepare for the significant upcoming regulatory and legislative changes, including pensions dashboards.
Recruiting and retaining skilled staff remains difficult
Finding and retaining experienced staff, especially for DB schemes, remains a key challenge across the industry. To address this, administrators are exploring different solutions including:
- cultivating the required skills in existing or new staff with training academies, and apprenticeships
- reducing critical resource demands by redesigning processes for improved automation or better segregation of tasks
- providing access to flexible working arrangements
Approaches to resourcing also vary, with some administrators using offshore teams, while others prefer to keep work in-house. Regardless of the approach, building a resilient and capable workforce is essential to delivering high-quality administration and meeting the evolving needs of savers. Administrators should also actively manage 'key person risk', where critical knowledge is held by one or two people, by embedding knowledge-sharing practices and succession planning.
Preparing for future administration demands: strategic growth
Across the market, administration growth strategies are evolving in diverse and dynamic ways. Some administrators are streamlining operations for greater efficiency, while others are expanding into DC, CDC, consolidators, or insurance services to broaden their offerings. As the market continues to evolve, administrators should assess their strategic position and align their business models with future demand, whether focused on growth, efficiency, or long-term security. Trustees should support this by recognising the strategic value of administration and encouraging investment in innovation and resilience.
Technology and innovation
With increasing demands on administration, pension administrators are modernising systems and rethinking service delivery. There’s growing investment in AI and digital tools.
Digital ambitions, legacy limitations
Efforts are underway to modernise and/ or integrate systems like administration, payroll, and member portals. However, outdated systems remain a significant challenge, hindering automation, limiting scalability, and increasing the risk of errors. While administrators are investing in improvements, this is being balanced with limited budgets and competitive pricing. Updating systems is expensive, resource intensive and time-consuming. Continued technology investment and strategic planning are essential to overcome existing barriers to deliver more effective and efficient services.
Member engagement: a rising priority
Member engagement remains low, especially in DB schemes where members often only interact near retirement. However, we expect pensions dashboards to increase member interest and engagement. Digital innovation is gaining traction, as many administrators are investing in member portals, and advanced tools like biometric ID checks, behavioural analytics, and personalised retirement journeys to accelerate adoption and enhance engagement.
Current innovations aimed at improving member experience include:
- mobile apps and personalised content
- 24/7 support
- UK-based teams for sensitive queries
- specialist teams for vulnerable members
- voice recognition
- tracking call response times and getting things right first time
Trustees and administrators should focus on providing a high-quality member-centric experience, with good governance and transparent reporting. This focus needs to be embedded in administration contracts, which should be periodically reviewed to ensure they remain suitable. As part of this, consideration should be given to the service level agreements (SLAs) used by administrators, to ensure they prioritise accuracy and member experience, not just focus on speed. Alternatives like end-to-end process measurement and member journey mapping could help shift the focus towards quality and long-term value.
With pensions dashboards coming soon, trustees and administrators should expect a significant increase in member engagement and member expectations of the administration service. Trustees and administrators should plan the likely impact pensions dashboards will have on administration services and review whether their current administration service, member engagement strategies and member interaction channels are likely to remain effective and be capable of handling the significantly increased demand.
Data quality: a continuing concern
Many administrators continue to struggle with poor quality data, which hampers automation and can lead to mistakes and delays. Administrators verify data at source however there is not always enough appreciation of how data degrades over time, for instance relying on a deferred member to keep their pension scheme informed of changes in address may not be enough to ensure all data remains up to date.
Technology improvements mean that maintaining data quality is now easier so, to move forward, both trustees and administrators need to appropriately focus on and invest in their data. Addressing these data issues and data gaps is essential in unlocking meaningful progress. We expect trustees to involve administrators in strategic discussions, and work with them to look at synergies between data projects and explore how new technologies can enhance data quality.
Additionally, improving data unlocks strategic value for the pension scheme in improving administration services, as well as other scheme services such as more accurate actuarial valuations.
Data quality also plays a critical role when transferring from one administrator to another as part of a change in administrator or moving to an insurance provider. Poor data can delay a transfer and make transfers costly and complex, undermining healthy market competition and negatively affecting saver outcomes. To ease the transfer process, trustees and administrators should focus on maintaining accurate, complete and up-to-date data. Early engagement with administrators is also crucial to ensure smoother transitions. Trustees should ensure they fully understand and negotiate contract terms with administrators, include data quality clauses where possible, and plan for exit strategies from the outset. We would also support industry standardisation, such as adherence to the PASA’s Code of Conduct on Administration Provider Transfers.
Structured AI governance emerging but gaps remain
AI use in service delivery is growing with the potential to reshape service delivery. While some administrators are taking a cautious approach, others are building AI into their business models, integrating chatbots and predictive tools into their operations. Some administrators are adopting a structured governance approach, with oversight committees and strategic partnerships guiding their AI use but others lack clear governance structures. As AI adoption grows across the industry, robust governance will be critical.
Risk and change management
Pension administrators are dealing with complex rules, fast-changing technology, and rising expectations from members. While there are ongoing challenges, we’ve seen some strong examples of how firms are managing risk and change effectively.
Steady progress in risk management
Many administrators use clear governance models – such as the 'three lines of defence' framework, which separates responsibilities into operational management, risk oversight, and independent assurance – to help spot and manage risks early. Tools like live risk dashboards and performance tracking are helping administrators respond quickly and effectively when issues arise.
Proactive approaches to managing change
Change is no longer just reactive – many administrators now have dedicated teams to manage it properly. These teams look ahead to understand how new laws or regulations will affect operations, plan resources, and improve systems. Structured processes help make sure changes are rolled out smoothly and effectively.
Navigating complex regulatory demands and rapid change
Regulatory change including pensions dashboards, GMP equalisation, value for money and Lifetime Allowance creates additional demand and pressure on administration requiring quick system updates and sometimes new skills. In seeking to manage this and avoid unintended consequences of poor service for members, we have observed some firms adopting dedicated change teams, securing additional funding, and working closely with industry bodies and us.
Cyber resilience
Pension administrators are becoming more aware of cyber threats, but there are still gaps in how they manage risks, work with suppliers, and plan for incidents. Key risks include phishing, weak supplier systems, and outdated infrastructure.
Cyber security practices becoming more robust
Most administrators have controls in place and follow key security steps recommended by the National Cyber Security Centre. Some go further, with strong testing routines and senior-level oversight. Good practice we found includes the following:
- Cyber risks integrated into overall business risk planning with clear leadership accountability.
- Recognised standards adopted, like ISO27001, Cyber Essentials, and the NIST framework.
- Robust access controls, featuring multi-factor authentication, strong password policies, and role-based permissions.
- Mandatory staff cyber training, phishing tests, and vetting for high-risk roles, with physical security also assessed.
- Mitigation and actions pre / during / post incident, including incident response planning, process for lessons learned, member communications and a constant focus on emerging threats.
- Real-time threat detection supported by advanced tools such as Security Information and Event Management (SIEM) systems and AI-based solutions like Darktrace.
- Incident response reinforced through regularly tested business continuity plans, recovery strategies, real-life scenarios, with ISO22301 certification showing plans meet high standards.
- Supplier management including cyber clauses in contracts, criticality assessments, and continuity planning.
Inconsistencies in certifications and Business Continuity Planning standards
Many administrators hold or align with international standards like ISO27001 and adopt UK government-backed schemes like Cyber Essentials or Cyber Essentials Plus, offering external validation. However, industry-wide consistency in certification is lacking.
Business Continuity Planning (BCP) also shows gaps, with communication protocols and executive oversight sometimes missing or lacking supporting documentation. We also found limited evidence of supply chain mapping and BCP testing with suppliers, with frameworks for assessing and managing supplier risk appearing unclear or underdeveloped. Only a minority of administrators are certified to ISO22301, which provides external validation of Business Continuity Management systems. These gaps should be addressed to protect member data and maintain trust.
Conclusion and next steps
Our review shows that pension administration is improving, with many administrators becoming more resilient and strategic. However, there are still challenges – especially around changes to regulatory requirements, technology, staffing, data, and cyber security.
To keep improving, there needs to be:
- Investment now for the future in administration services. Administrators and trustees need to prioritise investment in technology, systems and data for the purposes of improving member experience, drive value through increased automation and digitisation, and strengthen operational resilience which is critical for pensions dashboards.
- Improving data must be a priority for all. Effective governance and maintaining accurate data are key to the success of pensions dashboards, increasing public confidence in pensions and ultimately saver outcomes.
- As the market evolves, trustees must take greater responsibility and accountability for driving-up administration standards, in line with the fiduciary duty to their schemes. While trustee boards are becoming more professional, a lack of understanding of administration appears to persist among some trustee boards. Such knowledge gaps could lead to undervaluing the service and poor oversight – ultimately putting member outcomes at risk. Trustees should treat their administrator like any key adviser, involving them in regular meetings and including them as part of operational and strategic decisions.
- Risk and change management should be built into everyday operations. We have seen some good examples of administrators leading the way, which others can learn from. Improving these areas has the potential to boost resilience, compliance, and member trust.
- Cyber security is being prioritised, but there remain gaps in security certification, supplier checks, and incident planning that need attention. We encourage trustees and administrators to review TPR’s Cyber security guidance and to ensure they have access to appropriate cyber expertise.
We expect administrators and trustees to reflect on these findings and to work together to identify ways to improve administrative practices to better serve savers. Trustees should also periodically review their contract with administrators to ensure it remains suitable.
We will continue to prioritise administration and be a leading voice in the industry to promote higher standards and will be taking the following steps:
- Developing a new administration strategy to support a diverse, secure, and innovative market.
- Continuing direct engagement with a variety of administrators to build wider and deeper relationships to influence positive change.
- Setting clear expectations of trustees by updating our administration guidance and challenging the prioritisation of administration and data quality in a way that supports better member outcomes.
- Collaborating with the industry to understand risks and opportunities and work towards improving service, innovation, and data. We will be looking to actively participate in a variety of industry working groups. We also encourage providers to bring any innovative solutions to our innovation support service.
- Supporting better collaboration between trustees and administrators to tackle shared challenges.
- Providing feedback to the DWP to help shape future legislation.
We will share more details about this strategy in due course.