PPF assessment period leads to better data

Though this may attract short-term costs, it will lead to improved data quality that should result in more accurate and cheaper administration over the long term.

A PPF assessment period involves an intensive data audit and rectification exercise, and a review of benefits against the scheme rules, to ensure the correct benefits are in payment.

This allows a funding assessment to be carried out to determine whether the scheme should enter the PPF.

Schemes that act as if they are in the assessment period can also benefit from effective derisking.

Correct benefit structures, full data and ready access to liability information means schemes have everything they need to effect changes in investment strategy, move to buyout, tie down derisking opportunities or carry out liability management exercises.

As most schemes are moving towards some predefined end objective it makes sense to be able to take action quickly where needed.

Catching common data errors

The most common issues that arise on a review of the benefit basis are either that retirement ages have not been equalised correctly for both sexes or that pension increases have not been paid in accordance with the scheme rules.

Checking benefit calculations against the scheme rules will stop the rot

There are, of course, other problems that come up – such as scheme service being calculated in a different way than the rules allow for or an incorrect salary definition being used.

These errors will result in benefits being either under or overpaid and, in some cases, significant additional liabilities can build up over and above those the employer expected.

Checking benefit calculations against the scheme rules will stop the rot and could identify areas where the rules could be changed to bring benefits in line with what was intended.

Clean and complete data

Most defined benefit schemes are now closed, either to future accrual or new members.

This means these schemes will have a relatively stable data set that does not change significantly over time – the perfect opportunity to sort out the data once and for all and move forward on a stable footing.

Apart from complying with the Pensions Regulator’s data requirements, a full and thoroughly tested data set will make a big difference to the running of the scheme in the following ways:

• Ongoing administration will be a lot cheaper. Many trustees may not realise the manual remedial work that is carried out by the administrator each time they process a member calculation, as a result of incomplete or inconsistent data.

• Administration will be more accurate. Once the right data are in the right place for all members it is difficult for mistakes to creep in, as they might when a significant level of manual calculation work is required.

• Information can be provided quickly and cost-effectively. If your actuary does not have to spend a lot of time checking, reformatting, plugging holes in and verify data before carrying out actuarial calculations then the time they will take to provide you with actuarial figures will be significantly reduced.

Treat advisers like the PPF does

The final set of behaviours that trustees of ongoing schemes should adopt from trustees of PPF schemes is the way they deal with advisers.

There is no reason why ongoing schemes should not demand this level of service and accountability from their advisers

The PPF requires that tasks are completed within strict budgets and timescales, with any overruns fully justified against the initial agreed scope of the project.

There is no reason why ongoing schemes should not demand this level of service and accountability from their advisers.

Indeed, if trustees are going to embark on a full-scale sort-out of their benefits and data it is essential these sorts of project plans and budgets are put in place and reviewed regularly to ensure that costs and timescales are kept under control.

Marian Elliott is a director at Spence and Partners