“Nothing moves quickly in pensions.” That’s a quote I used to hear a lot during the time I have been working in the industry, and I used to believe it.
These days however, it seems that things have been moving very fast indeed. Whether it’s the new flexibilities, the end of contracting out, or changes to the annual allowance, to name but a few, it seems there’s always something that needs doing urgently and always a deadline looming.
With all that going on, it’s understandable that the day to day can sometimes get overlooked. It’s very tempting to find comfort in the assumption that what’s been going on for years is ok, but is it?
Below are three things that might not be keeping you up at night right now, but maybe they should be.
Ok, so we all know this is a lot better since the Regulator introduced their common and conditional data tests, and the annual reports that administration provide prove this. But has this been looked at in detail? Address data is always changing and benefits from regular review and there are others. When was the last time a data cleaning exercise was run? Are those NI numbers correct, or were temporary ones used decades ago and have never been spotted? Why are so many dates all 1st January 1950?!
You may not be approaching buy out this year, but even so it still might be worth considering including a personal details check the next time an announcement is issued.
Admin practice (or “why aren’t the benefits calculated and paid in line with the rules?”)
The scheme rules dictate the benefits that should be paid, and the administrator is in place to ensure that this happens. For the most part this is true, but having worked in wind ups I know that things are rarely that simple.
Pension schemes are complicated, and over many years there are many ways that this complexity can increase. Deeds of amendment, new sections, varying benefits, GMPs, different rates of revaluation, transfers, closures and many more can make what started out as a standard administration task very difficult. Add into this a change in administrator or two and problems can arise.
Is that paid up pension figure on record definitely correct? Is it clear that the transfer in is included within it? Has the right level of revaluation been applied? Sometimes a quick sense check of the figures on record is all that’s needed to spot things that look a little unusual.
Inaccuracies in benefit calculations can result in incorrectly valued liabilities and in over or under payments to members. These can be significant issues, which can cost to put right.
Asking your auditor to ensure that detail benefit audit sample checks are included when they carry out their annual review is a simple way to help to spot discrepancies.
What have you signed up for?
When the relationship with your service providers is going well it can seem like there’s nothing to worry about. It’s only when problems start to occur and the relationship starts to sour that the fine print of your engagement documents starts to feel very important.
It may relate to the limits of liability in the event an adviser makes a mistake, or who pays to fix a significant error. Or may relate to the terms by which you may part company with an adviser. It’s not uncommon to have significant and costly disputes over who actually owns which member files, and the cost of providing this information if the relationship ends. Agreements that may have been written back when paper files were common may cause issues now everything is online. Recently trustees have been looking carefully at the fine print in their investment management agreements, ensuring they fully understand the limits of liability with their investment managers.
It pays to be aware of your position and what you are signing up for at the outset. If that’s not possible then you will need to establish this before a relationship starts to break down.
The cost of a legal review at the start of a relationship can be a small price to pay if it avoids pain several or more years later.
Good governance isn’t just about making sure the big things get handled effectively when they arise, it’s also keeping track of all the everyday things that are going on at the same time and making sure these are running smoothly. It’s definitely cheaper in the long run.
For help and advice with the issues raised in this blog email firstname.lastname@example.org