The Pensions Administration Standards Association's Lorraine Harper argues that 2019 could see the administration of pension schemes reach a tipping point from which it could change irrevocably.
In the coming year, we expect there will be five key issues that will require schemes and administrators to rethink their approach.
Guaranteed minimum pension rectification will come to a close as HM Revenue & Customs shuts up shop. Those schemes that have not carried out rectification exercises will have missed the boat and must accept those pensions held by HMRC.
The administration industry working together and sharing best practice to help identify solutions to overcome any hurdles will be key
Some of these schemes will find previously unknown liabilities or be paying out for liabilities that transferred away some time ago. Stage four of this process requires bulk data amendment and contact with members, which could give rise to complaints.
A further GMP headache
Once GMPs have been reconciled, equalisation must then occur. For some this will be a major project to calculate equalised benefits between male and female members on a mass scale.
We do not yet have full clarity on the method to be adopted – for example, how to deal with previously settled benefits in relation to transfers and deaths – but mid-2019 will see much effort and cost incurred by UK schemes.
There is a silver lining, however, as equalisation will create an opportunity for schemes to rid themselves of GMPs forever by converting them to scheme benefits.
Data quality still paramount
Automation will continue to increase, particularly with respect to market consolidation of administration providers.
Recruiting experienced staff has become increasingly difficult, and the rising demand for immediate information is driving automation on a scale not previously seen by most schemes.
High levels of automation require benefit audits and data cleansing on a detailed, scheme-wide scale.
Data protection will once again be a challenge in all its forms, but cyber security in particular will be a real and ever-present headache for any organisation that processes large volumes of personal and sometimes very sensitive data.
The pensions industry may see some high-profile breaches and attacks on data in the coming year.
There are already concerns being raised about how we will continue to pay pensioners living in other parts of the EU after Brexit. As the final position becomes clearer in terms of the deal agreed, we will need to alter our practices to accommodate the changes.
Whatever 2019 brings, the administration industry working together and sharing best practice to help identify solutions to overcome any hurdles will be key – and PASA will be there to help.
Lorraine Harper is accreditation committee chair at the Pensions Administration Standards Association.
