How To Change Pension Administrators | Practical And Legal Considerations (Video)

Changing the administrator of your pension scheme can seem a daunting prospect. This webinar will focus on how to effectively plan for an administration transition and will break down the key practical and legal considerations when changing scheme administrator alongside consideration of some of the most common issues encountered.

This is a joint webinar between Gowling WLG and Trafalgar House and will centre on the interactions between Trustees' administration and legal providers.

Topics to be covered:

• Preparing for a transition
• Exit negotiations and agreements
• Best practice for new administration agreements
• Data protection considerations during and after an administration change
• Benefit specifications and common issues uncovered
• Key risks, pitfalls and their solutions
• Question and answer session

What will I learn?

After attending the webinar, you will:

• Recognise the preparatory work that needs to be undertaken before starting a transition project
• Understand how an administration transition project works
• Understand what you need to look for in your exit agreements
• Understand the key legal provisions in the administration agreement
• Recognise the most common risks and mitigations that can be deployed

Transcript

Daniel Taylor: Good afternoon everybody and welcome to this joint webinar between Trafalgar House and Gowling on how to change pension administrators the practical and legal considerations.

Just before we start today's session I will cover off some pieces of housekeeping. Today's session will last approximately 45 minutes with the presentation taking around half an hour. We have then left some time at the end to take your questions. As you would expect the session is being recorded but the cameras and microphones of everyone attending the session are turned off and muted throughout.

A couple of the slides we are using today, the recording and the transcript will be made available to everyone after the session ends. If you have any questions then please do raise them with us, we really want to hear from you. To ask questions please use the Q&A function at the bottom of the screen. In order to not interrupt today's presentation and to keep your time we will answer the questions at the end. But if we do not get to your questions in the session then we would encourage you to contact us directly and we will be happy to answer any follow up points you might have that we do not have time to cover on today's session.

So let us get today's webinar started with some introductions. My name is Dan Taylor. I am client director at Trafalgar House Pensions Administration. My role is to oversee all of our client relationships, which always start with the transition of new clients into our operation.

I have worked in pension's administration for over 20 years and have been involved in setting up and running third party administration businesses as well as working on well over 100 administration transitions. Most recently I have acted as project sponsor on a transition where Gowling were the appointed scheme lawyers and it was on this project that all parties found the negotiation and appointment process painless and successful so we thought it would be a really good basis and opportunity to share some of our tips and experience on how to manage these processes. My co-host for today is Maddy Frost who I will handover to, to introduce herself.

Maddy Frost: Thanks Dan. Good afternoon and thank you for joining us. I am Maddy Frost. I am a legal director in the pensions team at Gowling. I advise in all aspects of pension's law mainly advising trustees of occupational pension schemes and in recent years, I have advised a number of trustee clients in respect of changing their administrator from both in-house administration to third party administration and from third party to a new third party administrator.

Now as Dan has said the plan for today is for us to just give you a feel for both the key legal issues that arise when transitioning from one administrator to another and for Dan to talk about some of the practical issues. And as we have recently worked together on a transition that went very smoothly we thought it was a good idea to not only share our thoughts on why we think it went well but also what can sometimes go wrong.

So the agenda for today so, aside from leaving a bit of time for questions at the end, there is six key areas that we are going to cover today. The first is preparing for the transition, this is arguably the most important part of the process, get this part right and often the rest will fall into place.

Then we are going to talk about exit negotiations and agreements, now this is the divorce so to speak from the incumbent administrator. And it could be a relatively simple process if exit terms are clearly set out in the current agreement but if that is not the case we can talk about some of the key provisions you want to get in your exit agreement. Then we will touch on best practice for new administration agreements and I will highlight some of the key front-end legal provisions and Dan will look at some of the issues relating to service schedules and expected service levels.

We will then mention data protection considerations and I am sure you appreciate it is outside the scope of today's sessions. Look in any detail at data protection it could be a session in itself, and I am not a data protection specialist but I will highlight the things that you need to think about and when to seek advice.

And then finally we will mention benefit specifications, how important they are, common issues uncovered with them and as we go through we will look at some key risks, pitfalls and their solutions. So to start with, I am going to pass back to Dan who will look at the first stages of preparation.

Dan: Thanks Maddy. As we have said, changing pension administrators is complex and it can be a daunting task but, as you can imagine, the topic and requirements are extremely broad and we do not have enough time to talk you through everything so we are just going to highlight the key challenges.

So, as Maddy says, we are going to start by looking at how best to prepare for a transition. The first thing that I really want to look at, is the planning phase. Within that planning phase, the first thing that anybody who is participating in these projects needs to decide is who is going to participate. Who are going to be the right people to really invest in the process to make it a success.

The first part of an effective plan should always start with looking at who is going to participate and key to making sure there is no disconnect between each part of the programme and you need to really make sure that you tie in a project group that can stick with one of these programmes over many weeks and months.

They tend to be very long processes, so make sure everyone is preparing for the commitment. In fact last week I completed a transition that took a full year from the first approach to the final project closure meeting and this full year timescale is pretty typical.

Planning on whom is going to participate needs not only to encompass representation from each of the key stakeholders, typically trustee company and members but you may also need to consider any functional specialists who can support the process, especially in much more specialist and detailed areas such as systems, communications and commercial discussions.

Most reviews now include deep dives into areas like cyber-security and business resilience. As well as third party supply management. If you have people who can support you in these specialist areas, either from the trustee board or from the company then I highly recommend you get them involved from the start of the project.

On the next slide there are some examples of typical project roles. That should provide a good basis to start considering who you might want to slot into each position. We are not going to cover those in detail today, but we supply them as a piece of reference information.

One big question I am always asked is, when should I undertake the process or is there an ideal time to get it underway. It is a very common question for trustees and pension's managers to ask.

When it comes to annual timetabling, then the simple answer is 'no'. There probably is not a best time as there will always be tasks that are in flight over the course of a year or perhaps even a longer period. However I would encourage anybody embarking on one of these programmes to think about the more macro events or larger strategic changes that a scheme might be going through.

Significant rule changes or benefit changes, large fund switches or scheme closures are not ideal times to be changing administrator.

Also, please consider times that will demand lots of time from the trustee board as well, such as around valuations. Those are times or events that are best to be avoided. But I really would not be too concerned about the timing of annual events as most of these can be accommodated through the implementation plan.

Some people recommend to aim towards the live date of a new administrator at the start of a new tax year, but that often has its own challenges as well, as lots of events kind of get focussed around that time.

My tip here is to not be too concerned about the micro but do think about the larger things that schemes or trustees have on their agenda where it would not be a great time to be embarking on one of these programmes.

When you have got your team together and you have started to identify some of those more specialist type roles as well as who will fit into the structure that we have given you for a governance structure.

You then need to think about what your selection criteria might be. When it comes to criteria and when I engage with trustees, I always ask them what sort of administration service do you want? I always, pretty universally get the same answer. 'We just want a better one' and it is a view and an opinion that I have great sympathy with, but it is not one that is particularly helpful when you are entering this process, or from the supplier side actually when you are talking to trustees about what type of service that they want.

I understand the motivation, but it is really important to build a more detailed picture of what the future requirements and priorities are and it is really important through the selection process as well as the ongoing relationship and I will explain why a bit later when we start to look at how you construct your administration agreement.

The one thing I would say here is that not all administrators offer the same solution. Getting familiar with what is available in the market is often the best starting point. If you really do not what type of service you are looking for, then go out into the market and start having conversations with the administrators now.

You do not have enter a full formal review process to understand what different offerings might be. Most administrators are happy to have a non-committal introductory session where you can get to know a little more about them, see some of their materials and systems and that should help you form a picture of what is really important to you.

Areas of focus and consideration though are the split between core and non-core functions i.e. how much importance is the delivery of change projects you have compared to things like the member service. I think GMP equalisation and de-risking has bought that into relief a lot more for trustees.

What is your appetite? For the introduction of web or digital self-service solution. What is most important to you and your members in terms of the service proposition.

What member service priorities do you have and a big tip here is to look back on recent experience, the issues that you and your members have encountered and what are you trying to resolve. But do not be seduced by a service option if it is not relevant to you. We administrators get very excited and motivated about the latest bit of technology or innovation that comes onto the market, and if you start having engagement and conversations with administrators, that is probably the thing that you will see first, but be cautious about seeing the bright new shiny toy, it may not be something that is absolutely essential to your service. So make sure you have a good definition of what your criteria might be.

Selection. So the final point here. The final thing to think about on your preparation is, you need to think about which administrators you want on your list. There is a lot of constraint in the market at the minute, so do not be surprised that some administrators may not be interested in your service and from the supplier's side, there is lots of things that you look for. The first thing might be whether the client has a bundled service, the size, the complexity, the timing of a scheme may also come into play. Whether you consider whether it is the right option for you as well. The market is very congested at the moment, and so that is why an expression of interest is a really useful tool.

Often what you will see now is that trustees or pension managers will put together a proposal on a page, a single one page summary of what the scope of services and the scheme structure might look like and you should encourage administrators from the market to send you a single page summary on a page to come back that tells you whether they are interested in your contract, what their scope of services or recommended structure might be and what timescales might be involved. It is a really good, quick easy way to get a measure of the market and where the right home for your scheme might be.

One tip here is that you will probably need to wait longer than you anticipated because lots of administrators are being much more selective and cautious about implementation timescales, so be prepared for your timescales to shift a little when you get through that process.

I am going to hand over to Maddy and she is going to talk you through the other three items.

Maddy: Okay. Thanks Dan. I suppose preparation from a legal perspective then. I mean, I think from the beginning, the trustees should be mindful that it is legally responsible for the administration of the pension scheme and it is the trustee's decision who to appoint as its scheme administrator.

Now effective administration is absolutely critical to the proper operation of the scheme and the delivery of intended benefits to members, so it really should be part of the trustee's risk management for the scheme.

Now of course, the pensions regulator is very keen to ensure that schemes are properly administered and expects the trustee to pay close attention to the operation of the administration function. This is evident in the regulator's new single code of practice, which is intended to bring together previous codes and it sets out expectations that the trustee has to – that the TPR has on trustees to maintain and monitor good scheme administration.

It is also evidence actually TPR's interest by its recent defined benefits survey that was published last month, the primary objectives of that survey was to provide TPR with the greater understanding of schemes and their administration practices and strategies.

So against that background, the trustees should carefully consider who it wants to appoint as its administrator and sometimes trustees will appoint a third party evaluator to assist in this process. This is a professional who can help focus the trustee's mind on what is important to it in the tender process, to identify candidates that would be a good fit, to help assess shortlists against pre-established criteria and to develop a project plan and to ensure that parties stick to it.

But whether or not the trustee has the aid of an evaluator, it should first take a step back, consider and agree and I would recommend document what key factors are important to them and what their expectations are. Dan has already talked about the criteria that the trustee should consider and just to note that, e-administration capabilities should be at the forefront and it is particularly encouraged by the recent PASA guidance on the journey to full e-administration.

So what other support might the trustee need in the process? Well, it may want to establish a working group to progress the appointment and transfer. It can be quite a time-consuming process so working group with regular reporting back to the trustee can be valuable.

The trustee is going to need legal advice, particularly on the terms of the exit agreement and the front-end of the new administration contract. Advice will also be needed around other contractual arrangements and how to exit them as a result of the transition and of course, the support of the new administration plus the co-operation of the outgoing administrator are essential to aid a smooth transition.

A really important factor to consider when preparing for transition, is giving notice to the outgoing administrator. You need to check the termination provisions in the current agreement. Many administration agreements will be set for an initial term, so three or five years where it is not actually possible to terminate the choice in that period. Once that initial term has passed, either party is usually able to terminate by giving a prescribed period of notice to the other party.

Firstly check whether you are in the initial term and if so, can you even terminate? If you can terminate, there may be consequences of doing so – for example, being liable to pay certain fees. Even if you are beyond the initial term, check what notice has to be given to terminate. Generally it is a long notice period, anything from 60 days to a year and check what formalities are needed to give notice. For example, who should the notice to be given to and who should the notice be given from and if it is in writing, can this be done by email.

The trustee may want to consider having a discussion with the outgoing administrator before putting in the formal notice to start that early and good dialogue about the transition. However, factored into when you give notice, will of course be how long that notice period is and the trustee does not want to be in a position where the outgoing administrator is no longer obliged to provide the services, but the new administrator is not actually ready to go live and this is where the handover terms will be key.

It is also worth noting what other key contracts the trustee has in place for its own arrangements such as software or contractual arrangements with member tracing services. It is important at an early stage to determine if these services will still be needed following the transition and to build in time to exit such arrangements if necessary.

The trustee should also think about the service that may not strictly fall under the remit of pensions administration. So I am thinking about secretarial services and decide who is going to do this following the transition. It may be for schemes that were previously had in-house administration, that these are kept in-house but it is equally possible that these services will be transferred to an administrator and it may be that a separate agreement is needed for those ancillary services, so it is important to bottom out all these different parts of administration and make sure you are on the same page as your new administrator about what will be included in the service and what will not be included in the services.

Dan I think I am going to pass back to you now to look at data sources and timelines?

Dan: Thanks Maddy. Within the next couple of slides we have just set out some of the – as I said earlier – the project roles that you might want to give early consideration to and where people would slot into these various different roles.

On the next slide, we have also given you an idea of where various data sources for an administration transition might come from. I would also encourage anybody who is considering this process to look at some of those sources as well because if you can find data and documentation and information from other sources than the outgoing administrator, then that can often speed up your implementation transition as well and very often there is very good high quality in-house teams who can act and supply certain governing documentation for an implementation which can both, as I said, increase the timespan and often increase the support for the project as well, so giving some early thought to where the source of these data items might be, will really help in your preparation.

One of the big questions that I do not want to spend too much time on today because we are focussing on the administration and legal consideration is the timescales – the overall timescales for administration transitions. The other reason why I do not want to spend too much time on it as well, is because people can hold me to account on this point, which is very difficult to do because there are so many variables when it comes to administration transitions. The complexity of schemes, the sophistication of requirements, the new administrator's existing commitments, the outgoing administrators, capacity to hand off the scheme which often is not thought of or considered as part of the planning process, but I have given some outlines of our experience at Trafalgar House on where we are seeing difficult timescales over the last few years taking place for administration transitions.

As you will see, the first part is around the selection process. So this is from the very first approach to the point where an administrator is given preferred supplier status. We typically see that taking around one to three months. Contracts and appointments? This process is becoming a little bit more extended, we have seen that extend over time. Simply because now cyber-security, information security, data hosting and third party supplier management are becoming much more focussed areas within contracts, rightly so. Requiring a lot more specialist enquiry. Often as well, sign-off from the sponsor as well. We are seeing those processes extend the contract negotiation to around one or two months.

I think most suppliers in parts for a lot of trustees is outgoing exit terms and negotiation. We are seeing these processes take between two to three months and yes, very often we see that as one of the key areas that delays the overall migration process.

Transition timescales can then take anything beyond a year and it is really as vague as that. If you are looking at a large scale administration transition, that includes the transfer of people under TUPE then you could be looking up to anything up to about a year and a half but to put a fixed timescale on that is very difficult, so please use this yardstick for your estimates for your own programmes.

Minimum contract terms for administration agreements are now somewhere between three to five years as well. We are – I am giving you this as a yardstick, but it is very difficult to fix on the timescales but if you are using the outer numbers, then you should be in a pretty strong position.

Once you get to the end of your selection and appointment process, the next thing then is what does the next phase look like. What does the transition process look like. Rosie if we can go onto the next slide then.

What I have done here is set out the four stages that we follow at Trafalgar House which is broadly within these four buckets of work.

The first one where actually most of the work and effort and time goes in, is the learn phase. We are going to look at this a bit more detail when we come to look at the benefits specification and best practicing process to be followed under that, but the learn stage really is the part of the transition where your new administrator gets up to speed on how the scheme operates, what systems and processes need to be put in place and the more practical documentation that goes behind administering a scheme.

Also the governance structures reporting and project management goes into learn phase. It is easily the part of the process that consumes most resources.

Phase two is deployment. So where an administrator puts in place their systems, builds calculations and puts in place processes and communications. That tends to be the part of the process where you hear least from your new administrator because they are working in-house to develop all of their rough materials they use.

Then thirdly, and I think from a client and a trustee perspective, the test phase is the part of the process where you should expect to see and hear most from your administrator. It is where they are testing their systems, checking back all the learning that they have put in place and preparing it to past practice. It is where you will see things like data quality testing coming through and also the results of past case review.

Finally, as you would expect there is a final go live stage where all of the groundwork is put in place and the service can go live. The one thing that I would stress, both through the timelines as well as through the transition process, as much as you can is to consider that when you are forecasting an implementation, very often you are being asked to do a year or 18 months in advance and any project, especially one as complex as this, it is virtually impossible to get that go live date exactly right. Give yourself options! Sometimes delays or issues can be uncovered through the process, which means that the only viable option is to change the live date and whilst all parties will want to avoid this, and it can sometimes be the harder option, it can also be the least risky as well.

Be flexible and plan for the unexpected and that comes through both your exit negotiations and exit agreements, as well as the agreement with your new administrator as well. With the best will in the world, it is very, very difficult to forecast everything within these programmes, so make sure you have as many options as you possibly can and build in extension periods with your outgoing administrator.

And then the final thing that I am going to point out, again is that exit negotiations consistently cause most delays in the project and getting that exit agreement in place and the first set of deliverables, we see commonly causes most delays throughout the transition process. There are options that you can deploy. It is sometimes better to get initial cut of data under a change control, but please focus on how you will leave as much as how you will start and that will make sure that any forecasted plans have a better chance of success.

When we come to look at the divorce, the first step in this process is really establishing what the requirements are. And it is really up to your new administrator to take the first shot at defining that. While your outgoing administrator should have and will probably have a list of deliverables within their agreement, it is unlikely to have the granular level of detail that will need to be stipulated by your receiving administrator.

What you should expect to happen is your new administrator should supply you with a detailed document. That will set out exactly what is needed and when. Once you have this, you can then supply it to your outgoing administrator who will put together their fully detailed exit plan and costs associated with the plan as well. But as I said, even though you might have exit provisions in your agreement it will not necessarily state all of the detail and all of the deliverables that will be required.

Be prepared for some negotiation through this process and please just focus on the most important thing, which is making sure everybody is delivering the highest quality transition as well. If the negotiations are not going to plan and there is an extension, be prepared to revise your overall timescales for the programme.

Maddy is going to cover off some legal tips and advice on the best way to approach this.

Maddy: Thank you Dan. So I think that you can hear that we are advocating an exit agreement should be included in the administration agreement but if that is not the case and it is not there – or as Dan said, even if it is there it probably needs some refining and detail added to it. So it is not too late. The trustee will just have to agree one. Now, PASA has a voluntary code of conduct on administration provider transfers.

The purpose of the voluntary code is to set out a framework which will aid the transfer of services between providers to give some clarity in respect of the responsibilities and accountabilities and to limit the potential for delays.

This helps to focus minds on protecting the interests of members. It is not just a matter of exiting from a commercial contract. The people that will be affected by delays or ineffective services will be the beneficiaries of the scheme. It is important to get this process right.

What contractual exit terms will we advise? Well, generally we will have a commitment that the administrator will of course continue to provide the services as required under the current agreement, except to the extent that it is transitioned to the new administrator and also to provide services that the trustee reasonably requires to facilitate and orderly transfer.

Now the exit agreement will usually state when the administrator will stop providing services as Dan said, we would always recommend some flexibility in there. Sometimes things do not go to plan and it is necessary to extend that period of time with the outgoing administrator. We think it should have a detailed transition plan in any exit plan and an important part of the agreement is the obligation on the administrator to provide data to the new administrator. We would suggest that the agreement sets out a list of what data the trustee expects to be provided, when and in what form.

We would recommend a commitment on the administrator to assist with knowledge transfer? That means it will acknowledge that it may be asked to explain documents and material to the new provider.

And finally, the exit agreements should set out the costs and how these will be charged as part of the process.

So that is the exit agreement and now I am going to pass back to Dan who is just going to start off a discussion about the new administration agreement?

Dan: Thank you Maddy. I am just going to make one point. When you are starting to form your administration agreement, there is actually a really useful document that goes into a lot of detail, more detail than we can cover on today's session. It is the Key Principles of Administration Agreements published by the PMI in November 2014. It is still a really relevant and useful document and it certainly gives some excellent advice and guidance when you come to look at your attaching service schedules. If anybody wants to read more about this, then that is a really useful reference document.

I am going to hand back to Maddy. She is going to just pick up on some more of the detail of the new agreements.

Maddy: Okay. So before we get stuck into the content of the new agreement, in my experience it is helpful to set out how this process is going to work. Ordinarily the administrator provides the first draft of the agreement and discussions always start on a better footing if this first draft reflects discussions between the parties to date.

For example, if certain commitments were given or agreed as part of the tender process, they should be included in the first draft of the contract to get a generic contract with no tailoring. It is a bit of a frustrating place to start.

I also think being mindful of who negotiates the documents helps. Now clearly both sides will have lawyers drafting and amending the clauses, however it is important that the lawyers know what their respective clients priorities are and I find negotiations go better when it is not left lawyer to lawyer, but you have a client relationship manager from the administrator, pensions manager or chair of trustees on behalf of the trustee and they steer the process.

From a trustee's perspective, they often like to see the relationship manager being someone who they met at the tender stages and who they obviously want to because they were successful in that process. So for the trustee to see that continuity of personnel, is a really good start to building a strong relationship.

Also, we have said this – set a realistic deadline for getting the agreement in place. It is a really important contract. They have detailed schedules, so allowing time to get this document in place is a good idea.

In terms of some key clauses/the services it is really important the agreement clearly sets out, in detail the services to be provided under it and time should be spent on the description of services and associated fees.

There should be a robust standard of care expected from professional third party administrators and a commitment that they will comply with industry standards, coupled with a commitment to ensure that their processes are up to date and fit for purpose and will continue to be.

Also that the administrator will commit appropriate resources to the provision of services.

Then the liability cap. It is usual for the administrator to restrict its financial liability to the trustee under the agreement. The liability accepted will generally reflect the size and complexity of the pension scheme and the services to be provided. Now although advisers can provide some guidance on what an appropriate liability cap may look like, this is ultimately a commercial decision.

The final provision I was going to mention, is the delegation. The administrator will usually want the ability to delegate certain functions to third parties and the trustee will be asked to agree to this delegation of certain parties listed in the agreement.

The trustee needs to be happy with this list, but the way it normally gets happy with the list, is by the administrator confirming contractually that it has taken due care in the selection of these delegates and it remains responsible for their actions.

Of course, the other provision under the agreement that is important from a legal perspective is the termination provision but I have already spoken about that and although no-one wants to talk about the divorce on the wedding day, it is important to get those termination provisions right.

Dan, I think I am passing back to you to talk about services.

Dan: Yes. Please Maddy, I just want a quick word on the – really about the attaching schedules within a service agreement, past the negotiation. The service schedules are the most live important part of the agreement for an administrator and for trustees and clients as well and one really important factor within there is service measurement and I would encourage everybody to make sure that their service agreements have a heady mix of qualitative and quantitative service measures in there. The quantitative ones are always the easiest ones and probably the ones that all administrators will put in there from day one.

They are the ones I think that people assume they have a more objectivity around them, rather than qualitative ones which can sometimes be argued to be more subjective, but they need not be. There are lots of good measures available that your administrator will already be tracking so they should be included in there.

Examples are things like member feedback, error rates, automation rates, personnel changes and the results of independent audits and any exceptions that are highlighted from them and those qualitative measures can actually have a really powerful effect, driving the right behaviours with your administrator, only after you have set the key service criteria.

One other factor that is now commonplace in agreements, is the use of service credits/debits or bonuses. They are now very commonplace in agreements. They are used to give a commercial incentive to achieving goals and business aims and/or penalties for under-performance.

My tips here are that they should be used to remedy persistent issues rather than the kind of things that will naturally crop up over a service environment and be careful with any debits, not to fundamentally undermine the commercial nature of the contract. They can lead to a death spiral where your administrator does not have the resources and investment to remedy the issues that are causing the service credits and if this happens, then you are in a nightmare scenario where the administrator cannot invest anymore, cannot remedy the service because the commercial nature of the agreement is fundamentally damaged.

But certainly start with that mix of qualitative measures and there should be a good mix of them in there as well as the quantitative and they can be objective as well. They do not all have to be subjective measures, so please make sure you are focussing and including some of those in your agreements as well.

And on the list there, there is a list of typical list of schedules and this has kind of grown over the past few years and we are getting more and more schedules added. I think data protection has been one of the key areas that has grown and expanded over recent years but this list of 14 schedules are some of the most common ones you will expect or should expect to see in your agreement.

I think Maddy wants to pull out just a few of them that are particularly important from a legal perspective.

Maddy: Yes. So the schedules – as you can see they can be quite numerous. But the ones that we tend to look at are the key person's schedule. There may be key people that are really important to the trustee and the provision of services and if the trustee does identify a particular personnel or roles that will be key to it, these can be listed in a schedule and then with the requirements to inform the trustee or to sometimes seek the trustee's approval before those people or roles are changed.

Another important schedule is the change control schedule. This is the procedure whereby the trustee or the administrator can request a change to the services. It is usually referenced in the main body of the agreement with the detail in the schedule and we suggest that this sets out the process for making a change to the services.

We recommend it includes a template, timescale for considering change requests or coming up with an alternative. It should have a broad approach of how the parties will agree to additional fees, which individuals can request and approve a change and we would always recommend that the change request forms and their approval should then be appended to the administration agreement and kept together as an audit trail of what the amended services are.

We have already talked about the handover schedule in a bit of detail and we recommend that that is included but the final schedule I am going to talk about and talk about in a bit more detail is the data protection schedule. For data protection considerations as Dan said, have become more numerous over past years, particularly since the introduction of the GDPR which is still applicable, despite Brexit, it's applicable under UK law.

I noted at the outset I am not a data protection lawyer, I have excellent data protection lawyers here at Gowlings who I will get to look at the data protection provisions but the agreement will need to ensure that there is a legally binding contract in place between the administrator and the trustee setting out a number of clauses that are required by GDPR and we always think that it assists with this handover if the trustee actually goes back and makes a list or revisits the list that it did at the time GDPR first came into force. so look at its information flow mapping to see where the information needs to go, from whom, and by when, and it is also really important that the trustee updates its privacy notice following this process.

I am conscious of time but I just do want to make a note about cybersecurity. There should be robust cybersecurity provisions in the administration agreement. The pensions regulator has cybersecurity firmly on its radar and the damage caused by cyberattacks has been widely reported in the press, so we would recommend that the administration agreement refers to compliance with cybersecurity policies, sets out the administrator ensures that its team are aware of issues relating to cyber securities and it should also set out what happens if there is a data breach or a cyber-incident with a steps plan of what needs to be done by whom and when.

And on the topic of cybersecurity the trustee and the administrator should both be aware of both the pensions regulator's guidance on cybersecurity and the PLSA's guidance on cybersecurity.

Now I am going to pass back to Dan who is going to look briefly at knowledge capture.

Dan: Thanks Maddy. So yes, just one area I think it is really important for us to highlight is the knowledge capture process and the creation of the benefit specification. The administration market tends to talk an awful lot about data but you do not hear so much about rules and administrators' adherence to them, strangely, but this is where we at Trafalgar House commonly see the most complex and costly issues arising, especially when administrators change and it is the creation of the benefit specification that covers most issues and skeletons.

In fact I think there is a very good argument to state that you cannot really look at data until you have a very good quality benefit specification in place. So what is it? It is the central reference document administrators use to calculate and pay benefits. It is the working practical document that translates the rules into very functional outputs formulas, workflows and decision trees and whilst people like Maddy spend a lot of time looking at rules we spend a lot of time looking at benefit specifications.

The process itself involves administrators, mainly people in technical teams working through deeds and announcements to construct worked examples of rules and how benefits are calculated. Often this is done from a first principles basis which means that the only reference that is made for these documents is back to the original rules. Once it is created then the specification is then tested in practice against historic results and historic cases and then once all of that is in place and everyone is satisfied that it is the best representation of the scheme rules, it is then used as the basis towards making calculations.

It is the most important due diligence step an administrator takes when accepting a DB client, or in fact actually a DC client, it covers both types of entities. And the process can very often uncover differences in the treatment of benefits, interpretation and this is where really a good strong relationship between your administrator, actuary and lawyer becomes very very valuable through the process.

I would stress that it is such a useful tool that it needs to be updated and reviewed annually and trustees need to make sure there is provisions in their agreement to make sure that it is reviewed and that so that the specification does not lose relevance over time, and most critically as well that that specification forms part of the trustee's intellectual property. You will want it if you change administrators again in the future and you will want access and use to it as well. So as I said it is one document where an awful lot of time and effort goes into it, it is a really important basis, so make sure it is reviewed and make sure you still have access to it if you ever change administrators in the future.

And I think on the next slide there is just a few of the most common issues that are uncovered when a benefit specification is drafted.

Maddy: So I was just, I am going to mention one thing on the benefit specification before we go to our takeaways and that is, I think, it is important that both parties, all parties, acknowledge that the benefit specification is a really important document, that appropriate due diligence needs to be done on it.

However there must be an understanding that it is not the role of the new administrator to actively find problems, and discrepancies will be found. There will be issues but it should not start from the premise that this is automatically an error by the past administrator or a misinterpretation by the new administrator. It is often issues that come to light, may initially seem like an error but actually it is a different but still reasonable interpretation of the scheme rules so I think if everyone has that in the back of their minds when they are looking at the benefit specifications then it can help with progress.

So my legal takeaways, I am conscious of time.

First of all expectations, the trustees should discuss and agree the key factors it wants from its new administrator and write them down. It is important not to lose sight of that as you go through the detail of the administration contract.

The contract itself, if the administrator can provide this to the trustee for review tailored all the better, it aids for productive negotiations.

Other providers always check if a change of provider will have a knock on effect for other third party service providers.

And an ongoing dialogue, this is the beginning of a relationship, so make sure communication channels are open and issues can be aired and resolved quickly and efficiently.

So Dan, you key takeaways?

Dan: Thanks Maddy. Yes, so like Maddy I have got four, I think the first three speak for themselves.

Do not rush the process.

The second one in terms of roles, make sure you have the right people in place and give some forethought to specialisms that you might need and you might need to rely on through the selection process and keeping the same people through the process right through selection into the implementation process and beyond.

Think about the exit. Make sure that is not going to unduly delay and derail the process but then finally I think a really important and a point that Maddy made earlier is do not really on your lawyer to negotiate absolutely everything for you, you must engage with the process because there are some really important decisions to be made. Commercial decisions and operational decisions that in fact your lawyer is just not going to be able to do on your behalf and you do really need to engage with the process and make sure that anything you define through the criteria really does follow through into your service agreement because the reality is you will be managing those schedules and your administrator will be delivering against them for a very long time, three to five years, so making sure they are right and they reflect all of your key strategic aims is really important.

I did say at the beginning and Maddy said as well that we had an awful lot to cover today, so I think we were a little bit ambitious trying to do this in half an hour, given the range and scale of matters.

I have been keeping an eye on the Q&A box, I think we have got a few minutes now where we could take a question if anybody has anything they would like to raise?

If we do not then Maddy and my contact details are available so we are happy to take questions and speak to you after the session if you want to know anything more about what we have covered today.

Just another final point, as said a of the slides, the transcript and the recording will be available, it is probably going to be a few days before we publish it as well so please be patient with us.

I do not think there is anything coming through on the Q&As and I think as we have run up and a little way beyond our time we will probably leave things there today, so it just leaves me to say thank you for your time, I hope it has been useful and I hope you have got some useful tips to take away and consider before you start your administration transition process.

Maddy: Thank you.

Dan: Thank you.

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