The protection of scheme assets against internal fraud should be a top priority for administrators and trustees, experts have said, following the arrest of an employee on suspicion of a scheme-related theft.
An employee at pension administrator Capita was arrested in late August after an internal audit by the company uncovered financial anomalies within the Teachers' Pension Scheme accounts at its Darlington office.
Durham Police told the Northern Echo, which reported the story, that a 44-year old woman had been arrested, interviewed and released on bail until mid-October.
[Administrators] should have robust controls and systems should be capable of recording activity and separation of duties, which are key to avoiding someone helping themselves to fund monies
Margaret Snowdon, JLT, Chair of PASA
When asked to comment, a Capita spokesperson told Pensions Expert: “We can confirm that our routine audit activities identified a potential theft. This was immediately reported to the police and is now being investigated.
“We can confirm that there has been no impact on individual members of the Teachers’ Pension Scheme and the value of the fund will not be impacted."
The spokesperson added: "Given the circumstances, it wouldn’t be appropriate to comment further at this time.”
Margaret Snowdon, director at JLT Employee Benefits and chair of the Pensions Administration Standards Association, said internal fraud continues to be a big risk for schemes and should be a priority area of focus for administrators.
“[Administrators] should have robust controls and systems should be capable of recording activity and separation of duties, which are key to avoiding someone helping themselves to fund monies,” she said.
“Vigilance and strong management are paramount, and all administration staff should be aware of and look out for signs and feel safe enough to report any concerns. Internal fraud is rare, fortunately."
Risk management
Monica Cope, chief operating officer at scheme data specialist Veratta, said trustees must have a comprehensive risk management strategy in place to assess key risks to schemes on an ongoing basis.
“[Trustees] should assess every significant change to the scheme – for example if a new supplier is brought on board, or there is a change of administrator, you should go back in and review all those key operational areas,” she said.
Cope said a good starting point for trustees would be to review all personnel with either physical or online access to scheme assets.
“Once you know who has got physical access you then want to consider what the transaction and authorisation process looks like. Who raises the transaction and who authorises [it]?” she said.
Trustees must also have a clear idea of how their administrators protect against and respond to serious incidents within the scheme.
Cope said: “Trustees should understand what the incident management and escalation process looks like.”
