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IN-HOUSE SCHEMES COST MORE TO RUN

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Third-party administered pension schemes still cost less to administer than their in-house counterparts, according ...
Third-party administered pension schemes still cost less to administer than their in-house counterparts, according to a new survey. But the gap has narrowed over previous years.

The third annual pension scheme administration survey, commissioned by Hartshead Solway, reveals that schemes with more than 10,000 members cost on average £22.45 or 24% less per member than their in-house equivalents. It also reports that the principal reasons for administering in-house have changed since 1995.

The perceived advantage of greater speed/response now ranks higher than better administrative control. Buying in specialist skills and a better understanding of legislative requirements remain the two principal advantages of contracting out cited by the 201 occupational schemes, including local authority funds, which responded to the survey.

However, although the majority of third-party administered schemes met targets for cost savings, reduced management time and service quality, there were signs of deteriorating standards in the latter two areas over the past year, the report said.

Other findings include:

-- More than two-thirds of third-party administered schemes have a formal contract for administration, with these increasingly being with trustees and including an arbitration/mediation clause

-- The number of third-party contracts with penalties or a reduction in charges for poor performance has doubled in the past year to 13%.

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