Record-keeping: A progress check for trustees Savers expect their pension to be accurate and to reflect their contributions, but poor record-keeping can have a negative effect on members retirement benefits. Victoria Holmes DC, governance and administration
In 2010, we set a target for schemes to achieve by December 2012: 100% of common data such as name, address and date of birth to be in place for member data created from the beginning of June 2010, and a 95% standard for member data created before June 2010. In May this year we published the key findings of our latest research documenting the progress made by industry on record-keeping. The research shows encouraging progress on scheme data quality, however there is still significantly more for some schemes to do to ensure they have and maintain accurate records. Why is good record-keeping so important? The consequences of poor data can have a major impact on members, as well as significant cost implications for employers and administrators. Inaccurate or incomplete records can affect the ability of a scheme to carry out basic functions such as correctly allocating contributions in a defined contribution (DC) scheme, or correctly calculating a member s pension in a defined benefit (DB) scheme. These are just two examples of many that can inhibit the ability of the scheme to pay out the right pension to the right person at the right time. With the introduction of automatic enrolment comes a significant increase in membership of DC pension products. In DC schemes, the number of transactions per member is far greater than in a DB scheme, and the impact of each decision has a greater immediate impact so the effects of inaccurate data can become compounded over a relatively short period of time, resulting in a significant cost to put right. Where have you got to? By now we expect schemes to have taken significant steps to meet the targets set out in our 2010 guidance. Where schemes anticipate significant difficulties in meeting the targets, we expect them to approach us and we will provide support as appropriate. There are a number of specific tasks that trustees will need to carry out to meet these targets and the key ones are set out in the checklist over the page. The deadline for achieving the standards for data quality set out in our record-keeping guidance is 31 December 2012. 2
And going forward The checking and correcting of data is not a one-off exercise. Processes should be in place for administrators to notify trustees of any data issues they identify. And trustees should make sure that they have processes in place to monitor the quality of their record-keeping, and administration service overall, on a regular basis. In order to do this effectively, trustees will need to ensure that they regularly engage with the administrators of their scheme, and be comfortable that recordkeeping and administration standards in their scheme have a level of visibility that enables them to assess the quality of the administration service they receive. This might include receiving frequent administration reports for discussion at trustee meetings and frequent attendance of the administrators at trustee meetings. As we said in 2010, we intend to improve the standard of record-keeping across the industry by strengthening our regulatory approach. We will take enforcement action where the evidence we gather indicates a breach of pensions legislation. Where record-keeping problems are so severe as to indicate a failure to maintain adequate internal controls, resulting in a failure to administer the scheme in accordance with the scheme rules and the broader requirements of the law, these schemes will be prime candidates for investigation. However, consistent with the regulator s approach of working with trustees, providers and administrators where possible, we would be less likely to enforce breaches of legislation where trustees and providers are in the process of implementing realistic plans to address their identified data problems.? Did you know...? In trust-based schemes, the trustees are accountable for data quality, even though administrators may control it on a day to day basis. The legal obligations for schemes to keep proper records are set out in trust law (basic fiduciary duties) and legislation, for example, the disclosure, internal controls and data protection requirements implicitly require accurate record-keeping. A failure to take significant steps to improve data quality may therefore lead to schemes being in breach of these requirements. It is important that trustees satisfy themselves that they have the processes and controls in place to maintain good quality data, and recognise that this is a key accountability. 3
Action checklist Trustees should: Read our guidance on record-keeping at www.tpr.gov.uk/guidance/guidance-record-keeping Discuss plans with the pension scheme administrators Have their data checked Receive their data score Put a plan in place to complete data and sense-check accuracy Check the plan is on track to meet the regulator s target Approach the regulator if significant difficulty in meeting target is anticipated Make plans for assessing and fixing conditional data (data that is more specific to each scheme) Identify any systemic issues and take steps to address them Agree processes with scheme administrators for ongoing data monitoring, reporting and dealing with errors 4
Common data items required for all members of all schemes Data field National insurance number Surname Forename(s) or initials Sex Date of birth Date pensionable service started/policy start date/ first contribution date Expected retirement/ maturity date (target retirement age) Membership status Last status event Address Postcode Comment TN formats should be regarded as missing data. The final character of NI numbers is not essential. Check that surname is present. Forenames are preferable but initials are an acceptable alternative. Check that sex is present. Check that date of birth is present and consistent (earlier than date joined scheme, retirement, date of leaving). False dates should be classed as missing data. For trust-based schemes this will be date pensionable service started. For contract-based schemes this will effective start date of the policy or the first contribution date, depending on the provider s requirements. This field may be derived or explicit; for most DB schemes it will probably be derived as the scheme s normal retirement date. Need to check that it is populated if that is a scheme/system requirement, that it is consistent with scheme rules and statutory requirements, and is later than date of birth and pensionable service date/first contribution date. Check that a current valid status is recorded for each member. This may be a dual status, eg active or deferred member with partial retirement. For contract-based schemes this may be active or inactive. Check that benefits taken are consistent with status, and, if status history is recorded, that the latest status is the same as the explicitly recorded current status. An address should be present for all members of all schemes. Because of DPA requirements an exception is permissible for active members of those trust-based schemes in which communication with members is normally sent via the employer. Gone away, unknown or similar should be treated as missing data. Check that a postcode is present if address is not identifiable as being overseas. Will assist with valuations for actives, for whom storing full address may breach DPA principles. 5
How to contact us Napier House Trafalgar Place Brighton BN1 4DW T 0845 600 0707 F 0870 241 1144 E customersupport@thepensionsregulator.gov.uk www.thepensionsregulator.gov.uk www.trusteetoolkit.com The Pensions Regulator September 2012 You can reproduce the text in this publication as long as you quote The Pensions Regulator s name and title of the publication. Please contact us if you have any questions about this publication. We can produce it in Braille, large print or on audio tape. We can also produce it in other languages.