09 Apr From outsourced administration to business partner
The freneticism and intensity of the two-pot system implementation is a prime example of why companies and fund managers should consider the benefits of outsourcing their retirement fund administration to specialists.
Apart from the example of the two-pot implementation, there are several solid reasons to outsource pension fund administration.
1. Expertise and skillsets.
Pension fund management needs expertise which stretches across several areas such as administration, governance, investment strategy, regulatory compliance, and member communication.
By outsourcing, pension funds access the diverse expertise of the management company and apart from saving in-house resource cost, they gain a broader and more complete approach to managing schemes.
2. Reduced keyperson risk.
It is never comfortable or sensible to rely on any one person, but outsourcing reduces the risk of disruption through absenteeism or churn of key individuals.
An outsourced pension fund administration company takes responsibility for continuity, irrespective of its resource changes or absences.
3. Scalability and flexibility.
Dealing with business growth, company restructuring, regulatory changes or specific changes can compromise service as you follow a lengthy recruitment process, restructure, or upskill personnel. Markets and companies evolve, and outsourcing offers the flexibility and agility to focus on change itself, rather than managing the change of essential operations.
4. Cost efficiency.
Outsourcing naturally attracts fees, but this cost must be weighed against the savings that can be realised on salaries, benefits, recruitments costs, management, training, and facility costs.
To provide a balanced picture to outsourcing pension fund administration, some will raise a loss of direct or day-to-day control or dependency on a service provider as factors which dissuade outsourcing.
However, when deciding whether to outsource or not, a two-step thought process can assist in decision-making.
One:
Are the benefits of outsourcing sufficiently compelling to make a strong business case?
Two:
If the business case is solid, then it comes down to selecting a reputable outsourced partner which makes you actually want to lose day-to-day control while gaining confidence in controls such as a SLA and building a close relationship with the pension fund administration company.
And then there’s a third option:
Substitute the word “outsourced” with “partner”.
Bianca S Moyo
Communication Senior Manager
Salt Employee Benefits
MoyoB@salteb.co.za
salteb.co.za