Forthcoming pension flexibilities, minimum governance standards for defined contribution (DC) schemes, and the end of contracting out for defined benefit (DB) schemes will make record-keeping vital to deliver quality outcomes for savers.
In a report published today, the regulator outlines how its thematic review into record-keeping and subsequent intervention helped schemes improve their data processes.
As part of the review, the regulator worked closely with schemes which resulted in them undertaking data cleansing work, working with the scheme administrators to improve processes, and taking the decision to wind up legacy schemes.
The regulator’s executive director for DC and public service pension schemes, Andrew Warwick-Thompson said:
“With the volume of changes ahead, including the new pension flexibilities, keeping accurate member records must be a priority for trustees. Errors can be costly and difficult to unravel, and if members make retirement choices based on inaccurate information about their circumstances, this could impact them for the rest of their lives.
“Through our thematic review we have focused on our strategy of education and engagement with trustees about the importance of record-keeping and we have seen standards rise in a number of cases without the need for enforcement.”
The regulator is calling on schemes to manage record-keeping as part of their internal controls framework, understand the risks and potential high costs associated with poor data, and to take action to address any issues.
As part of this it is vital that trustees work with their administrators and receive the right level of information from them, so they can be assured that their legal obligations are being met and that good outcomes for their members are not at risk from poor record-keeping practices.
Mr Warwick-Thompson said: “Over the next 12 months we intend to reinforce our expectations in this area and continue to reflect them in the material we publish. This will take into account developments in government policy and legislation, including the various new duties for trustees of DC schemes.”
Minimum governance standards for DC schemes come into force next month, which include a requirement to process core financial transactions promptly and accurately. Additionally, the Government’s plans to introduce a system of automatic transfers from Autumn 2016 will require some DC schemes to record information about members who leave with pension pots under £10,000. There are also specific record-keeping requirements for public service pension schemes, coming into force in April 2015.
Contracting out for DB schemes ends in April 2016. In 2018 HMRC will write to all individuals with a GMP entitlement to tell them how much GMP they should receive according to their records. Schemes that have not reconciled and cleansed their data are likely to receive a large number of queries from members at this time.
Go to the record-keeping thematic review follow-up report below
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