Has data ever been such a sexy topic? Or to put it another way, has data ever hit the front pages so often?
High-profile breaches, investigations into mega corporations, the introduction of GDPR and consequent avalanche of emails filling up our inboxes, have all crystallised the notion of ‘bad’ data management.
Good data management is taken as a given. A ‘no news is good news’ situation. People expect businesses and administrators to store their personal information securely and carefully, rather than it being a cause for success and celebration.
The pensions industry is no different. And sentiment remains that schemes do not take their data quality seriously enough.
This much is evident from The Pension Regulator’s Corporate Plan 2017-20201 which picked out poor data integrity and security as a key risk. TPR was of the view “that the quality of record-keeping in the public and private sector remains unsatisfactory” and represents a “long-running risk to member benefits and the accuracy of benefit statements, scheme returns and valuations.”
Another report2 from TPR last month found that just 17% of schemes had carried out an annual data review – despite the Regulator’s clear expectations – and astonishingly 8% were not sure. This is despite the value of these assessments, with over two-thirds (69%) of schemes who carried out a regular data review identifying issues as a consequence.
It is therefore of little surprise that added regulation continues to be introduced to the sector in an attempt to raise standards and getting schemes living more healthily.
In many senses, TPR exists in the role of the exasperated doctor doggedly encouraging an unhealthy patient to kick their bad habits. Yet time and time again, schemes walk out the doctor’s office and straight away fall back into unhelpful behaviours.
Profiting from good process
In truth, regulatory intervention should not be required for schemes to get their ship in order, as the benefits of good quality data are huge. They will lead to more accurate calculations as well as less ‘re-work’ and liability claims.
Schemes will also find it simpler to maintain strong data quality once good processes have been installed and so any new sources of poor data – such as incorrect records on a monthly interface face – can be identified and remedied immediately.
A rigorous approach to data can also be adopted in other areas of the scheme’s financial management such as around bulk buy-ins and buy-outs where data quality carries an impact from its ability to get a quote from an insurer to the final cost to the Trustees.
In a landscape where bulk buy-ins and buy-outs are becoming increasingly common, data quality that complies with regulation, strives for industry best practice and increases the efficiency of the scheme can only improve the likelihood of schemes – and their members – achieving good outcomes.
Conversely the consequences of neglecting data are very damaging and directly pose operational, reputational and cost risks.
Data quality checks are an inherent component of any modern administration system, and this is what is slowly being introduced to the industry, in line with the regulator’s demands.
An apple a day keeps the regulator away
The latest regulation requires both Defined Benefit and Defined Contribution schemes to report annually on both Common and Scheme specific data quality and comes into effect this year. Punitive actions from TPR for trustees and schemes are being drawn up in the event of non-compliance.
This can be an incredibly complex process for those with complex or unusual benefit structures and carry a significant knock-on impact for the day-to-day activities of the scheme. Which is why schemes should be taking ‘an apple a day’ approach rather than having to make a last-minute dash to get scheme healthy.
Moreover, rather than forming a peripheral part of the day-to-day running of the scheme, data management should form a key strand of strategy. Data quality is not a one-off project, or an arduous hoop to jump through – it is a behaviour that will ensure scheme health and lead to better outcomes for scheme members, managers, sponsors and regulators alike.