Once HMRC has notified individuals of their GMP entitlement, members will have certain expectations and if scheme numbers are incorrect this could result in unplanned scheme liabilities. Data quality can impact members who left some time before contracting out, transfers out or those who were never members of the scheme.
Improving data quality can often be more complex than it initially appears. A reconciliation can call for up to 85 separate pieces of data and it takes only one of them to be wrong or missing to start having a knock on effect on the rest of the scheme. Even modest issues with data quality can materially increase a scheme’s risks and potential costs.
Time is rapidly running out to make meaningful changes to data. From this year The Pensions Regulator (TPR) will assess all schemes on the quality of their data and they will be measured against their peers. Though TPR favours encouragement at the moment, those schemes who have done the least to improve their data should expect the regulator to be very clear on their failings.
The regulator will look favourably upon those who have made some progress on their data, whereas those who have yet to start can expect progressively harder questions.
Trustees must also consider the calculation of contingent spouses' pensions and how this might be influenced in any GMP equalisation exercise the scheme undertakes.
The regulator sees good data as a central plank of good governance, so if there is a need to commit money to update systems or improve communication to members about these complex projects, planning them together in order to reduce costs would be a sensible move.
If trustees haven’t gone through their GMP process, they will probably find their scheme administrator has a contracted-out liabilities reconciliation/rectification programme in place. If they haven’t signed up for it, they should act.