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Article | Pensions Briefing

Improving your pension scheme data in 2018

The latest updates from HMRC and The Pensions Regulator on two data cleansing projects

Pensions Corporate Consulting
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By Vanessa Burke and Andy Campbell | January 23, 2018

With schemes focussing heavily on their GMP reconciliation projects, and with new data scores requested in the scheme return, 2018 will be a big year for pensions data cleansing.

2018 promises to be an important year for many schemes to ensure that their data is fit for all future purposes, beyond administering the correct benefits. Following recent HMRC updates on the GMP reconciliation timeline and commentary from TPR, Vanessa Burke and Andy Campbell take a closer look at some of the key data priorities for many schemes in 2018. This includes, finalising the reconciliation of GMP entitlements with HMRC and improving common and scheme-specific (conditional) data scores, while also looking at the possible impacts of the General Data Protection Regulation (GDPR) as well as the Pensions Dashboard.

GMP reconciliations – what has changed?

On 6 November 2017, HMRC published their latest countdown bulletin, which provided further updates on the Scheme Reconciliation Service (SRS). The SRS was made available for a finite period to enable pension schemes to reconcile their contracted-out records against those held by HMRC. HMRC have now confirmed the deadline for submission of queries will be 31 October 2018 and have extended the date by which SRS queries will be answered from December 2018 to March 2019.

In addition, HMRC have confirmed that they will not be issuing statements of entitlements to individuals after December 2018 as originally planned. We believe that this change has been made primarily because of the rollout of “Check your State Pension” to all individuals and the planned release of the Pensions Dashboard programme in 2019.

For those schemes that ceased to contract out before April 2016, HMRC have confirmed that the deadlines for schemes using HMRC’s cessation reconciliation service remain unchanged at 31 December 2018.

GMP reconciliations – what are our recommendations?

In general, we would not expect the announcements from HMRC to trigger a change in approach for any schemes undertaking GMP reconciliation exercises. While we welcome the clarification and small extension of the deadlines, most schemes are well advanced with their GMP reconciliation and we recommend that schemes continue to work in line with the previously agreed timescales for completion.

Although HMRC are no longer planning to issue statements of entitlements to individuals, we do not expect this to change the motivation for trustees to complete this exercise. Ultimately, paying the right benefit to the right member at the right time should be the number one priority for trustees. Reconciling GMP amounts with HMRC remains an important part of improving data integrity, and for many schemes, it is more cost effective and easier to gain greater comfort and clarity around GMP entitlement as part of a bulk exercise rather than on a member-by-member basis. Holding reliable GMPs also has the added benefit of the data being more suitable for future projects that may arise, such as liability management exercises or transactions as well as GMP equalisation and conversion, without the need to delay these projects while data is cleansed. Seeking appropriate actuarial and legal advice early on in the process can help ensure that maximum value is extracted from these exercises, while also helping minimise the risks of issues surfacing at a later stage.

As more and more schemes move deeper into the rectification stage of their GMP journey, both reconciliation and rectification tolerance levels are becoming an area of focus for trustees to consider and they should make sure they are clear on the difference between these two tolerances as well as the impact they have on their members. We would encourage all trustees to understand the implications of their chosen tolerance level in detail:

  • At what date is the tolerance set (for example, members’ date of leaving, GMP payment age, current date)?
  • Have trustees managed to address all of the issues that can be considered in bulk before adopting a higher tolerance?
  • The more members whose GMPs the trustees cannot reconcile with HMRC, the greater number of cases will need rectifying. Consider whether the benefit of completing the reconciliation project quickly is outweighed by the potential of a larger rectification exercise.

One final aspect of the GMP reconciliation project that should not be forgotten is that communication to members needs to be as clear as possible to help them understand their benefits. A robust audit trail is important in ensuring clarity on the approach taken to help the trustees in the future.

Measuring your data – a guide from TPR

2018 scheme returns will include a new question asking trustees to provide their common and scheme-specific (conditional) data scores. This is part of a governance drive from TPR to remind trustees that they are ultimately accountable for good record-keeping of their scheme, even though third parties may administer the records on a day-to-day basis.

In the graphic below, we have set out what TPR means by common and scheme-specific data fields, including some example. However, please note that this is not an exhaustive list.

Figure 1. Definitions of common and conditional data
Common data – basic data items that are used to identify scheme members Scheme-specific (conditional) data – other data that is key to running your scheme and meeting legal obligations
All schemes should include all of these for all members This will vary from scheme to scheme
  Will depend on many factors including scheme type, structure and the administration system used
Examples include: national insurance number, surname, sex, expected retirement/maturity date, postcode, date of birth, first name or initials, membership status, address, date pensionable service started Examples may include: employment records such as salary details and service history, employee and employer contribution history, information on the value of the member's pension and date of the estimate, benefit specifics such as GMP entitlement or HMRC protections, investment decisions - units purchased, date sold and held

The scheme’s data score is calculated as the percentage of members in the scheme that have present and accurate common or scheme-specific data. It is worth noting, that if even one data item is missing for a particular member, the member is treated as a fail and this will reduce the data score.

Measuring your data – what are our recommendations?

We expect that this change in reporting requirements from TPR is likely to result in many trustees and pension managers looking more closely at the integrity of the member data. While many trustees have already taken significant steps to improving the governance of their data, this change is likely to lead to further reviews in future to ensure that the data has not degraded and processes remain robust.

We would expect trustees and pensions managers to ensure that their administrator has identified important scheme-specific data. This data will vary from scheme to scheme and will depend on many factors including scheme type, structure and how data is stored on the administration system.

When measuring the scheme’s data, it is important that trustees are confident that their administrator has put sufficient processes and controls in place to ensure the quality of the data held. We recommend that trustees show a keen interest in the quality controls that their administrators have in place and challenge these controls where they may not appear comprehensive or sufficiently robust.

Where common and scheme-specific data scores are not as high as expected, trustees should have a good understanding of the ‘test passes’ and ‘test fails’ that culminate in their data score. However, it is important that data cleanse and improvement work is not being done just to improve data scores. While a low data score may, at face value, provide trustees with an indication of possible issues, any data-cleansing project should be prioritised to yield real benefit and value including a better member experience as well as reduced risk and long-term cost for the trustees and the company. A thorough cost-benefit analysis of proposed actions should be performed before proceeding with any data cleansing project.

When data issues are suspected or identified, we expect trustees to put in place an improvement plan that addresses the issues in a prioritised and logical way. Trustees should seek to receive regular update reports highlighting the progress being made. When performing data cleansing work, trustees should always consider the possible implications for both day-to-day administration and future projects, as well as the materiality of the decisions they are making for individual members and for the scheme as a whole.

While trustees’ focus needs to be given to the data that directly affects the benefit entitlements that are promised to members, there can be considerable cost savings in correcting multiple data issues at the same time. A well-planned, tactical approach to data cleansing could include reduced costs in communicating changes to members and greater efficiency in work going forward by reducing the need for manual intervention.

GDPR, the Pensions Dashboard and the future

From 25 May 2018, new laws regarding data protection will come into force through the EU GDPR. The GDPR places more onerous obligations on data controllers (including trustees) requiring them to keep records and documentation about processing activities, implement data security requirements and comply with requirements for reporting breaches, as well as carry out data protection impact assessments where appropriate.

Many trustees will have a lot of work to do ahead of 25 May this year, and should carry out checks to ensure that their administrators are able to secure personal data properly, review existing data processing controls and consider any changes required to be fully compliant with GDPR. We recommend that trustees regularly review the information published on the Information Commissioner’s Office’s website to keep up to date with the latest developments.

The Pensions Dashboard remains high on the pensions agenda, with the government still planning to go live during 2019. Quite how this will work, the role of the trustees and the data that they will need to provide still remains uncertain. Trustees will need to remain vigilant so that they are able to act quickly when details are provided, but having high-quality data ready to go will certainly help keep trustees firmly on the front foot.

2018 feels like a landmark year for pension scheme data. As GMP reconciliation exercises conclude over the coming months, schemes will now turn their focus to wider data cleansing; improving the quality of their data for purposes beyond just day-to-day administration. With the advances in technology and the forthcoming Pensions Dashboard, member experiences will continue to improve as more schemes head down the route of member self-service and pensions information available at their fingertips in an easy-to-understand way!

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