There are many valid reasons for considering outsourcing your pension administration (or indeed any other service). However, it is essential to be clear on your objectives and what you hope to achieve. This clarity of vision is essential as it underpins and determines the likely success or otherwise of your project.

The drivers toward outsourcing can be numerous. Outlined below are some thoughts from Go Pensions on the strategic reasons for outsourcing.

Focus on core business:

Pensions’ is not your organisation’s core business. Outsourcing allows you to redirect strategic internal resources for core activities.

Focus on pension strategy:

Outsourcing the transactional elements of pensions to an external third party ensures that an organisation’s internal resources are freed up for more mission-critical activities such as setting the pensions and benefits strategy.

Migration to appropriate technology:

Service providers are reliant on their use of technology and infrastructure. As a result they invest significantly in their development to enhance productivity and quality. Investing in expensive, non-business core infrastructure is rare in-house where generally a ‘make do’ attitude is applied.

Risk management:

All outsourced service providers stand behind their service offering and are well-placed to resolve issues as they arise.

They have a much greater delivery capability than an in-house pension department. In addition, they have rigorous disaster recovery plans in the event of any natural disasters, accidents, etc.

Operational expertise and coverage:

Outsourced service providers operate to processes developed and delivered by teams that have operational expertise. Outsourcing gives companies access to high class capabilities and sufficient administrator coverage for illness, holidays and peaks and troughs of workload.

Your headline thought process should include the following:

• What type of service do I require?
• What are the needs of the key stakeholders?
• What services elements must I have and which are nice to have?
• How should I manage the relationship with the service provider?
• How do I monitor the timeliness and quality of the service delivery?
• Where is my risk and how do I manage this?
• How do I future-proof the service to ensure that it remains appropriate for the lifetime of the contract?
• What business standards do I require?
• How do I select the appropriate service provider?

3.         What’s the process?

When outsourcing the four key stages identified below are the most crucial in selecting an appropriate service provider:

• Establishing the requirements

You need to understand both your current requirements and to anticipate the likely market trends over the lifetime of the contract.

• Selection of the bidders

You need to select a list of potential service providers that have the ability to meet your requirements. You need knowledge of their current situation and future development plans.

• Preparing a ‘Request For Proposal’

Your RFP needs to be balanced, i.e. ask all the relevant questions whilst reflecting the areas that are truly important to you. The RFP must elicit the best responses from the bidders but ensure that they can be evaluated effectively.

• Evaluating the proposals

You need to interpret and evaluate the responses received in an objective, fair and consistent manner. This is the most difficult and time-consuming task. Your evaluation needs to be balanced and to highlight the strengths and weaknesses of each proposed solution.