Professional Pensions Admin Panel, March 2010
In the light of the consultation paper on member record keeping, would you have gone further along the “enforcement” road, or has the Regulator gone too far?
We are totally supportive of the focus now being placed on data by the Regulator and are comfortable with the direction and progress so far. The previous approach of ‘educate and enable’ hasn’t had the desired effect so a stronger message needs to go out. It may be a situation where the regulator needs to name and shame offending organisations to gain the necessary engagement across the industry. Clearly there will be considerable feedback for the Regulator to digest before any formal regulations are produced but any step forward in producing a regulated framework for record keeping will help in ensuring good, quality data.
How can spending money on a data cleaning exercises save money and pay for itself, or is this just another additional cost burden on schemes?
Whilst a thorough data cleansing exercise does incur cost, it should be viewed as short-term pain for longer-term gain. The long term cost savings from having cleansed data could be considerable. For example, cleaner data will lead to more accurate scheme valuations which should lead to reduced scheme liabilities, Where a de-risking strategy is being implemented i.e. buy-in, buy-out exercises any resulting costs will be calculated on accurate data and should be significantly less than would be the case without a data cleansing exercise having been undertaken. .Any data cleansing exercise should therefore be seen as a good investment!
If scheme administration is outsourced, should the existing third party administrator be the one to analyse and test the member records? When should trustees look to independent third parties for this service?
Whatever route the trustee selects, they, together with any independent party they appoint, will still need to work very closely with the existing administrator. As the administrator works with the data on a daily basis, they will have scheme-specific knowledge and therefore able to undertake such an exercise in a very cost effective way.
If, however, there are any concerns with the competence of the existing administrator or the exercise is being undertaken in preparation for more strategic decisions i.e. buy-in, buy out exercise then an external independent review of data is essential and any increase cost incurred will be justifiable.
Large schemes will have the resources and larger governance budget to comply with the Regulator’s requirements. The opposite is true of smaller schemes, where data may be at its poorest. What practical cost effective steps can these smaller schemes take to comply?
The scheme’s size does not necessarily equate to the quality of data. It can be argued that smaller schemes may well have higher quality data because the data maybe more tightly controlled. The scheme’s age, its historic evolution and the amount of paper records utilised are more likely to determine the quality of the data.
The trustee and administrator can carry out initial work by scrutinising records on a periodic basis, for example through the regular stewardship reporting, or by concentrating upon a particular area of data where past issues have been known to occur. These could be looked at on an ad-hoc basis or in conjunction with events such as the scheme valuation, annual renewal, or the annual report and accounts.
by Daniel Jacobson
Client Manager