17,500 cases per day will need reconciling

Wed 27 May 2015

Equiniti estimates that, from April 2014 (when SRS started) to December 2018, on average 17,500 contracting-out records per day will need to be reconciled due to the end of contracting out in April 2016 and the introduction of a flat rate single-tier pension. Currently, reconciliation errors are as high as 50% in some of the schemes that are using Equiniti to manage the process.

Equiniti is warning that, with HMRC withdrawing its support for benefit queries in December 2018, schemes should put in place measures immediately in order to hit the deadline for registering – April 2016. HMRC is expecting around 10% (ca 450 schemes) not to register to take advantage of its free and dedicated ‘contracting-out reconciliation support team’ over the next 41 months. Despite this, and based on current estimates, HMRC is still expecting around 7 million queries over this period.

Equiniti advises that, while it is possible to adopt a ‘do nothing’ approach, schemes could face legal challenges from members in the future, coupled with funding issues, or even issues with future de-risking exercises such as buy-in/ buy-outs, if their current data quality assumptions and calculations prove to be erroneous.

Currently, the main queries that Equiniti are addressing relate to: membership reconciliation, National Insurance Contributions Office queries, issues relating to scheme mergers or bulk transfers and incorrect historical scheme data.

Equiniti recently hosted two discussion forums with guest speakers from HMRC, attended by trustees and scheme managers representing approximately 10 million contracted-out members, to raise awareness of the upcoming deadlines and the key factors in considering, or in undertaking, a reconciliation of contracted-out liabilities.

 Stewart Winter, operations director – data solutions (GMP),Equiniti, said;“Contracting-out reconciliation has not received the attention it needs and our experience thus far, is that many schemes who thought that they were in good shape are actually not. The consequences for schemes that choose not to run a reconciliation exercise could ultimately be quite serious and, post 2016, it could impact on de-risking strategies and even raise the spectre of member litigation if the contracting-out calculations prove to be incorrect.”