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Default retirement reforms pose operational challenge for administrators, says PASA

PASA identified risks including system strain, data issues, more complexity and the need to support vulnerable or disengaged members.

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Default retirement reforms pose operational challenge for administrators, says PASA
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PASA published new guidance on the major operational challenges facing administrators as default retirement solutions come in. 

The report looked at how the new guided retirement duties would reshape defined contribution (DC) administration and warned that failing to plan early and work together could limit the reforms’ success.

The guidance highlighted the scale of change needed across systems, processes and governance. 

It said administration would be key to seeing if policy aims actually lead to better outcomes for savers.

Master trusts are expected to introduce default retirement solutions from 2027. 

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PASA identified risks including system strain, data issues, more complexity and the need to support vulnerable or disengaged members.

Jessica Rigby, chair of the PASA DC Working Group, said: “Default retirement represents a fundamental shift in how pension schemes support savers at retirement. 

“The direction of travel is clear, with a renewed focus on delivering sustainable income rather than simply providing access to pension savings.

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“While the policy intent is strongly supported, delivery will be complex.”

Rigby added: “Many existing administrative processes were not designed for ongoing retirement journeys or income provision, and significant change will be required across systems, data and operations.

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“This Guidance focuses on the practical steps needed to prepare. Early engagement between trustees, administrators and providers will be critical to ensure solutions are deliverable, scalable and aligned with member needs. 

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“Without this, there is a real risk operational challenges could constrain what can be achieved in practice.”

David Fairs, PASA chair, said: “These reforms reinforce the growing recognition of administration as a critical enabler of good member outcomes. 

“Administration is no longer a back-office function, it sits at the centre of delivering policy intent and supporting savers through increasingly complex retirement journeys.

“The industry has an opportunity to demonstrate its strategic value, but this requires realistic planning, investment and collaboration.” 

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Fairs added: “Administrators must be involved early in decision making to ensure proposed solutions can be delivered effectively and sustainably.

“This paper provides a timely reminder that success will not be judged by design alone, but by how well these changes work in practice for savers.”

Maurice Titley, commercial director: data & dashboards at Lumera, said: “PASA’s paper on administration and the system implications of default retirement pathways is a helpful guide at a time when the industry is looking beyond significant regulatory change to successful implementation.

“Default retirement pathways have the ability to generate more predictable retirement journeys and improve member engagement. 

“However, it requires platforms that can rapidly adapt to changing requirements.”

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Titley added: “Given additional reform across the pensions market, demands on administration and the technology that supports it are only likely to accelerate over the coming years. 

“It emphasises how crucial it is for schemes and providers to retire technical debt decisively, standardise data structures and adopt platforms that are truly designed for scale and innovation.”

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