Canadian defined benefit pension plan sponsors have an average per-member administration cost of US$165, according to a new report by CEM Benchmarking Inc.
The report, which analyzed 80 global DB plans, found the average per-member administration cost was $164 in the Netherlands, but was $105 in the U.S. and $71 in the U.K. It noted these costs are shaped by five factors: economic factors such as currency and purchasing power, inactive members, cost of living, economies of scale and pension maturity.
Notably, the report found U.K.-based DB pension plans have lower administration costs, in part, because they’re often situated in low-cost environments compared to those in Canada and the U.S., which are often situated in high-cost environments like Los Angeles, New York City and Toronto.
In the U.K., the cost of servicing active, accruing members and retired members is about the same, while outside the U.K., pension administrators spend slightly more on retired members than active ones, and more so in the Netherlands.
The report also noted differences in costs are driven by service model. In the Netherlands, Canada and several large U.S. urban centres, DB pension administrators follow a ‘high-cost/enhanced’ service model whereas in the U.K. and most of the U.S. a ‘low-cost/core’ service model is typically employed.
Low-cost/core service providers spend less on contact centres and governance and far less on information technology, said the report, while high-cost/enhanced providers invest in member services such as contact centres or more one-on-one support, such as in Canada.
It also found Canadian administrators also spend more on functions such as mass communication and newsletters, services to employers, data and money collection.
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