The study found that this is the primary motivation for a fifth of employers – despite the common belief that lowering costs is the main aim.
Over two-thirds of employers have outsourced their pension administration for defined benefit (DB) schemes, according to the research, which surveyed more than 100 senior managers involved in DB schemes.
Only 15% of employers offering a defined contribution (DC) scheme alongside their DB arrangement kept both DB and DC scheme administration in-house; 12% retained in-house administration for DB but outsourced their DC schemes; and 4% administered their DC schemes in-house while outsourcing DB.
Other reasons for outsourcing were a lack of in-house resources (17%); a lack of appropriate expertise (17%); and the need to control costs (13%).
Commenting on the study, Stuart Heatley, managing director of administration at Aon, said the non-financial benefits of third-party administration were arguably the most important.
“Outsourcing pension arrangements to a third-party administrator allows a business to focus on its core activity.
“The peace of mind brought about from outsourcing to a specialist with technical expertise on tap is likely to be of value to an increasing number of schemes.”
The publication of the research followed Aon’s loss of two
five-year contracts to rival Capita Hartshead, which will provide administration to the £2bn Scottish Power pension scheme, and the £761m Manweb Group section of the Electricity Supply pension scheme. TW
