Pension scheme record-keeping must improve to protect the hard-earned savings of members, The Pensions Regulator has warned.
The failure of more schemes to properly assess the quality of their record-keeping is a serious issue, new research carried out by the regulator has shown.
View the findings from the record-keeping survey 2014.
In a strong message to scheme trustees and administrators, the regulator said more needs to be done to ensure the right benefits are paid to members at the right time.
The regulator’s executive director for DC, governance and administration, Andrew Warwick-Thompson said:
“It is highly disappointing to see that a proportion of schemes still do not see record-keeping as a priority.
“We will be working with schemes to improve standards but we will take action where problems become apparent to us and report publicly on the outcomes, as appropriate.”
Whilst schemes that are regularly measuring their data are showing improvements, the regulator’s latest research, published today, has identified a slow down in the rate at which schemes are taking action to measure their common data for the first time, with figures almost unchanged since last year’s survey.
The research shows that while two thirds of trust-based scheme members are in schemes that have met the regulator’s ‘common data’ targets – data such as a member’s name, address, NI number and date of birth – a ‘ceiling’ is being reached in terms of schemes engaging with the process.
The regulator is calling on more schemes to assess the quality of their record-keeping and properly maintain data to avoid costly future administration issues.
In addition to the original seven cases opened as a result of last year’s thematic review into scheme record-keeping, which are ongoing, the regulator has opened four further investigations into schemes that were included in the review.
Mr Warwick-Thompson said: “Members have the right to expect to be in schemes which are well run, which is why good record-keeping is an integral part of our codes of practice and why we will address cases of bad practice. Our recent thematic review unveiled a number of concerns, which led us to open new cases.
“Schemes that are measuring their common data regularly are improving their scores, highlighting the benefits of undertaking this important exercise. However, with the Government’s legislation on quality standards coming into force in under a year, the introduction of automatic transfers, and the end of contracting out for DB schemes, it is vitally important that all schemes work closely with their administrators to really get to grips with their data and avoid problems and high costs further down the line.
“Through the record-keeping survey, and other research and analysis, we consistently see weaker governance and administration standards in smaller schemes. To address this we plan to overhaul our strategic approach to improving the quality and skills of the people responsible for running pension schemes.”
Headline findings from this year’s research include:
Common data
- Overall, 63% of members of all trust-based schemes are in schemes that have a common data score of more than 95%.
- Large schemes perform better, with 64% of schemes having a data score of 95% or greater, compared with 33% of small schemes. Only 9% of large schemes had not measured their data, compared with 44% of small schemes.
- There is a year-on-year increase in DB and DC schemes hitting the 95% common data score level – for DB schemes the proportion rose from 56% to 68%, and for DC schemes the proportion rose from 47% to 55%.
- There was no significant change in the proportion of schemes failing to measure their common data – 9% in 2013 and 10% in 2014.
Conditional data
- Overall, 32% of members are in schemes that have a conditional data score of more than 90%, with year-on-year increases across all scheme types.
- There continues to be a high proportion (42% in 2014, compared with 46% in 2013) of schemes where conditional data is not formally measured.
- Large schemes are more likely to have measured their conditional data. 71% of small schemes did not measure conditional data, compared with 40% of large schemes.
- For the first time in this survey, the regulator asked schemes if they were going to be used for automatic enrolment. Of those schemes to be used for this purpose, 64% had a common data score of 95% or greater, and 34% had a conditional data score of 90% or greater.
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