APTIA PENSIONS ADMINISTRATION POD EPISODE 3

John Wilson

Hello, and welcome to the third episode of the Aptia Pensions Administration Pod. I'm John Wilson, Head of Pensions Technical at Aptia. And today we're going to be talking about the increasing importance of quality assurance and audit for pension schemes. So what do we mean by quality assurance when it comes to pension schemes? At Aptia, it means the way we assess the quality of the work we do in the pension administration business, and how we can improve it and make it better. It covers the accuracy and reliability of all our calculations, our processes and our member communications. In short, it's fundamental to our governance. 

At Aptia, we have a specialist quality assurance and audit function, or QA&A team, that we set up eight years ago. We think – and our clients tell us – that this team stands out in the market. The QA&A team, also known as our first line of defence, has expanded and adapted as our industry has changed and faced fresh challenges, and it's at the heart of the initiatives and the innovations that we talked about at our recent Aptia conference. I'm pleased to say that the QA&A team's founders, Darren Brame and Denise Crowe, are here to talk about this important subject. 

Welcome to you both. Can I ask you to introduce yourselves first? Denise, if you could go first please.
 

Denise Crowe

Yes, thank you very much, John, and thank you for inviting me along today. So I lead our First Line of Defence at Aptia and I report direct into Darren.
 

John Wilson

And Darren?
 

Darren Brame

OK, John, nice to be here today. I'm Aptia's chief risk and commercial officer for the UK and I'm a member of the UK board. Part of my role from a first line defence perspective is to oversee the activity that the QA&A team perform and act as a link between the team and the board.
 

John Wilson

We've established what QA&A is, so let's now talk about why it's so important to try and set some context. The Government Actuary’s Department recently published a blog highlighting the vital role it plays in the work that we do in the pensions industry. And here's what they said: 

“In pensions administration, precision is paramount. Errors can have a significant impact on somebody's post-retirement life. In the battle to mitigate and reduce errors, the role of quality assurance cannot be overstated.” 

So could you talk a bit more about why QA&A is rising up the agenda? Darren, maybe I could put that one to you.
 

Darren Brame

Yes, of course. So obviously we welcome GAD's blog, but for us their interest didn't really come out of the blue. It reflects a range of trends that we're seeing and initiatives that affect the services that we provide and we've been adapting to. At Aptia, we call this the administration age, and that was a key theme in our recent conference. And it means that the industry is increasingly focused on the part the administrator plays in the running of the scheme and how schemes engage and communicate with their members. That's why the Pensions Regulator has intensified its engagement with pensions administrators like Aptia. 

TPR also expects us as administrators to comply with elements of regulation from the Financial Conduct Authority, such as Consumer Duty, which has lots of implications for how we treat members and a particular focus on how we handle members who are potentially vulnerable. 

Our industry's playing catch up on digitisation and self-service. Pensions dashboards are on the way, as we know, and schemes must have their data ready for dashboards by October next year at the very latest. 

The regulator has said schemes must offer members digital services that help them understand their pensions, particularly from a dashboard perspective, and give them that information so they can take the next steps, particularly where it's tracing some historic pensions. But it's about much more than dashboards and compliance. You know, members increasingly manage their lives online. They expect us to be on a par with retail banks and other industries for digital services where perhaps the pensions industry has been lagging behind for some time now. And we're also seeing AI transforming how we serve members even further.

At Aptia, we're embracing those trends. We need to make sure our systems are robust, evolving and working properly so that we can continue to provide high quality member experience. We've got big projects in the pipeline. We'll talk about some of those later and QA&A are playing a vital role in underpinning the successful delivery of those. 

So, John, you can see that QA&A is essential for third-party administrators in a fast-changing industry and a wider world if we are to be the UK’s leading pensions administrator.
 

John Wilson

Thank you, Darren. That's really clear, and we'll add the links to the GAD blog and our article about the administration age to our website. Denise, could you tell us a bit more about how you about establishing the QA&A team and the rationale for doing it?
 

Denise Crowe

Yes, sure John. Darren and I set up the team in 2017 when we were part of JLT and its job was to run independent audits on our operations teams to see how they were performing and to help them improve. This is still its main job, but over the years it's taken on a lot of extra responsibilities. 

When we started the team, we had technical managers dispersed around the organisation. But we identified that throughout the teams, there was no consistency of approach or efficiencies of scale. So we wanted to create a centralised team. We knew that there was an increasing demand from trustees and clients for independent checks on processes and procedures and we wanted to ensure that we were seeing good member outcomes and efficient processes and controls for administration of the scheme. 

From the start, we made sure that the team didn't report through a client facing senior leader. We wanted it to be as independent as possible from our operational teams.
 

John Wilson

Thanks, Denise. So, so maybe, Darren, you could say a bit more about how the team is organised and what's distinctive about it in our market.
 

Darren Brame

Yeah, of course, John. We have a team of quality managers in the UK and India who report through Denise, and Denise reports to me as part of my role on the UK board. And as Denise said, I'm not directly aligned to any client teams and this means – and this was really important to us when we established the team and continues to be so – that our QA&A function is genuinely independent from the operational side of the business. So we've kept that independent approach. 

This cuts out any suggestion of any conflict of interest and enables us to confidently report internally and externally on the genuine state of our business. When we publish a report to a client, it is genuinely the same report that we would have shared internally, and Denise and I were keen when we set this team up that that was the case. So we think we are the only pension administrator with a QA&A team on this scale, organised as a central function and, most importantly, maintaining that level of independence. 

So, Denise, why don't you talk a little bit more about your wider role at Aptia?
 

Denise Crowe

Yes, thank you, Darren. I lead what we call our First Line of Defence. Now, as a business, Aptia has three lines of defence. Our third line of defence is our group internal audit function. Our second line of defence is our group risk and compliance function, which operates across the group, and the first line of defence looks after the UK business. So my role is to make sure that we are protected against risks that will come across in everything we do in the UK, reporting straight through to the UK board. 

Within the first line, not only do we have our QA&A function, but we also have subject matter experts in data privacy, financial crime, risk and compliance. We work very closely with the second line, who have responsibility for risk and compliance across the group, and that ensures that the work we do in the first line aligns to the group activities and addresses the risks that the group audit and risk committee will want oversight of. QA&A forms a large part of managing our risks at an operational level.
 

John Wilson

Thank you both. I think now maybe we can really cut to the chase. And Darren, I'll put this to you: how does the team help make our business better?
 

Darren Brame

John, look in any organisation, and things go wrong We administer more than 1000 schemes with over 6 million members. And of course it's very difficult, borderline impossible, to micromanage each of them. The main thing is when things go well or we find issues that we find out as soon as possible, put them right and improve any of the shortcomings we see through improved process or procedure – and ideally now using technology. 

The QA&A team's job is to help managers do the best job they can. We found initially that administration teams could be a little nervous about being audited, but very quickly they've understood that it's a chance for them to speak to us, engage with us, partner with us, and tell us what could be better. As I said, Denise reports the results of QA&A’s audits through to the UK governance board and I take the findings from there to the UK board for discussion. This means that we on the board are on top of how we're performing for clients and members and more importantly where. And there's a suite of improvement programmes that essentially are built from the outcomes of these audits, and ultimately QA&A as job is to make administrators’ lives easier and improve the member outcomes for our clients.
 

John Wilson

OK, I want to talk a little bit more about how the function remains current. I mean, obviously there's always huge change in our industry and even at Aptia, which was formed two years ago this month. So how has the QA&A team evolved as we've grown and the industry has changed? Maybe Denise, you could pick up on this one.
 

Denise Crowe

The team has grown as we've taken on responsibility for more pension schemes, and its role has expanded to meet the new demands and challenges that come with that. These have been driven primarily by regulatory initiatives, but also by client requirements and increasingly the pace of technological change. 

When we set the team up, it was an internal governance function working behind the scenes to make sure our processes were sound and effective, and it focused entirely on auditing individual teams of administrators. But clients saw the real value of an independent specialist team and very quickly started to ask us to audit particular processes or aspects of their scheme. This has is increased as schemes have moved from manual calculations to robotics and more automated calculations. 

The team's main job is still to do regular audits of our administration teams to make sure that we are operating correctly, but there has been a lot of change in our industry and the team has adapted to that change. So we are seeing more requests for client focused audits where a trustee or an Aptia client director for a pension scheme may ask the QA&A team to find out the reasons for service delivery problems and to make recommendations to put things right. 

To give you an example, we carried out an audit for a client who was concerned about certain aspects of service delivery, such as they were considering whether or not to retain our services. We deployed QA&A to carry out an audit to address the service issues the client was seeing and we presented our findings back to the trustees at one of their board meetings. We didn't hold back. We gave them full details of where we've seen delivery issues and they very much appreciated the honesty of our report. This has led to not only an improvement in the service delivery for that client, but also the trustees now have so much confidence in Aptia, and they were so pleased with the outcome, that they now act as a reference for Aptia. And this is just one example where QA&A has added value through the work they do. 

We are also seeing requests for automation audits, where pension schemes adopt robotics and automation. Trustees are asking us to run regular checks to make sure the systems are working properly and producing the right results. 

And we're also seeing more periodic client audits. Some pension schemes like QA&A’s work, and the information they receive, so much that they commission us to do regular audits to make sure things are operating properly. 

And we look at new scheme on boarding. When Aptia starts to manage a scheme, the QA&A team may audit the project to check how we've absorbed the data and that we followed the correct processes both operationally and through the installation process.
 

John Wilson

Thanks, Denise. Well, it seems clear that the work you do will continue to be important. So, Darren, what's coming up next for the QA&A team?
 

Darren Brame

So, John, we have a couple of new initiatives for our QA&A function. First is our continuous quality programme, or CQP, which we launched on 1st of June. Up until now the Q&A team would audit one team, one scheme or one process at a time. That meant that there could be a significant time gap between audits, and it felt like we could operate a little more effectively and efficiently.

So from the 1st of June, we now carry out a number of checks on process, procedure and our calculations across all of our operational teams each month to give us much greater coverage. It means that each team across our estate receives a degree of audit focus every month and a key measure here for us is the member outcome in terms of accuracy, speed of answer and effective, clear and simple communications. 

This means better engagement between the QA&A and operational teams because we're talking to them more regularly. It will highlight issues more quickly for us and as I said, we'll assess procedure, controls, innovation, calculation, ways of working and a number of other areas. This will improve delivery across our business because we'll be identifying system issues and procedural shortcomings that otherwise historically might have taken us a little bit longer to spot. 

Secondly, transformation. At Aptia we have the investment to transform our business, to digitise and automate our services, but making sure that we keep the human touch that some members will always need and demand from us. Our transformational project has a dedicated quality manager from the QA&A team who audits and overseas new services, processes, technologies and routines as they're developed. So a senior member of the QA&A team also attends our transformational working groups. So we're playing an integral part in the development and the mapping of our future development activity. 

So I guess a lot of what we've talked about is quite technical. Denise, maybe let's focus a tiny bit on the empathetic element of what Aptia does and the role that QA&A plays in that.
 

Denise Crowe

The empathy element is so important, and it’s something Malcolm Reynolds stressed in the last podcast episode. Quality assurance isn't just about impersonal processes. It's about making sure our teams provide the support and understanding people need to make important decisions, especially when they are feeling vulnerable. Some people who have lost a loved one want to talk to a real person, but others want to manage their lives online. That's why that's why we're launching a digital bereavement process that gives family members the option to engage with us completely digitally. 

QA&A are involved in making sure that service is empathetic, even though it's done through a digital platform. Whether we're talking to people in person or engaging with them online, we should show empathy and understanding and QA&A checks that we do just that. 

We're also setting up our member forum to listen to members face to face, especially if they haven't had the best experience with Aptia. QA&A will have a new role in sitting in with members and reflecting on the journey and how we can improve, based on the views that they share with us.
 

John Wilson

Thanks both. So as we draw to our close, what lessons and key takeaways can you share from running this team for eight years across both JLT and Aptia? Denise, if I could start with you again.
 

Denise Crowe

I would say we underestimated the value that trustees would place on the role of independent audits. The regulator stipulates that as part of the trustee's governance duties, they must make sure third parties are operating as they should. The QA&A team gives them that extra layer of comfort that we are continually challenging our processes and our ways of working.
 

Darren Brame

If I add to that, based on the experience we're seeing here, we think all third party administrators will need to develop a function aligned to ours here at Aptia. It can only strengthen the industry when the spotlight is firmly on the administrator and it will give our clients the confidence and reassurance that we are absolutely committed to continuous improvement. It will improve member journeys, and it shows our commitment as an industry by making sure that when members engage with their pensions, their experience is seamless and efficient. And fundamentally, John, that's what we're here for.
 

John Wilson

Indeed it is, Darren, and thank you and Denise. 

That's it for this episode of the Aptia Pensions Administration Pod. Thank you. as ever, for joining us as we explore this important aspect of pension scheme management and oversight. Remember that we release new episodes every month, bringing you expert insights and the latest developments in pensions administration. So please be sure to subscribe on your preferred podcast platform so you never miss an episode. 

For more information and updates, visit our website. We'll be back next time with another important discussion and we hope to see you then. In the meantime, please remember that the content provided in this podcast is for informational purposes only and should not be construed as professional advice. It should not be relied upon for any purpose, and we strongly recommend seeking appropriate professional advice tailored to your specific circumstances before making any financial decisions. 

Thank you for listening and goodbye.