News analysis: A breakdown of the Pensions Regulator's annual record-keeping survey, and how smaller schemes can make up common data shortfalls and correct errors.
The regulator's target for common data (see box) is 100 per cent for records created after June 2010, and 95 per cent for records created before that time, recognising difficulties schemes could have with past administration.
Data types
Common data: Items that are applicable to all schemes, to uniquely identify members.
Conditional data: Dependent on scheme type and structure, needed for effective administration.
Source: The Pensions Regulator
The latest annual record-keeping survey from the watchdog found almost half of small trust-based schemes were not aware of the requirement to meet common data standards.
It found only 56 per cent of small trust-based schemes measured their common data score, compared with 96 per cent of large schemes. And only 37 per cent of smaller plans were meeting the lower target.
Of respondents that do not measure common data, 44 per cent of schemes were not aware of the guidelines to do so (see graph below). Mark Hodgkinson, director at Muse Advisory, said for many small schemes, “lifting the lid” on their historic record-keeping could unearth some poor previous administration.
“Quite a lot of people didn’t understand the consequences of not quite getting everything right. I think that was a pretty common scenario.”
For those schemes that unearth errors around member entitlements, Hodgkinson suggested a three-step action plan:
Look for patterns in the mistakes to see whether they are linked by a common miscalculation.
If possible, correct the error.
If it is not possible to correct the mistake, come clean to the regulator with an alternative proposal.
“If you have shown that you have taken some positive action and you are being open with the regulator, you are likely to get a much better hearing,” said Hodgkinson.
Among schemes who have not achieved a common data score of 95 per cent or above, the main areas of information that need to be improved are address, postcode and national insurance number (see graph below).
Julian Mainwood, partner at Barnett Waddingham, said addresses were the more difficult data gap to fill.
"It is likely to be perhaps the national insurance number, but often that's explainable if it's a child receiving a pension. [But addresses] can be very quickly out-of-date."
Roger Higgins, partner at consultancy KPMG, said schemes cleaning their data could keep the cost down by doing the process in one go.
But schemes that are a long way off from wind-up might have decided it would be a waste of money to trace the address of a deferred member, for example, that is far away from retirement.
He added: "Do you start paying to try and find him, knowing that if you find him, he may move again and not tell you?"
In a press statement issued with the report, Louise Hallard, policy lead for defined contribution, governance and administration at the regulator said it was undertaking a detailed review of compliance.
"If we find breaches of pensions legislation we can take action, including issuing improvement notices and financial penalties," she said.
The regulator's powers include:
Directions to carry out certain tasks – eg, rectify gaps or errors in member records – using Improvement or Third Party Notices under sections 13 or 14 of the Pensions Act 2004; and
penalties for failure to comply – up to £5,000 for an individual and up to £50,000 for an organisation.
In very extreme cases, prohibition of trustees and/ or appointment of new trustees.
