PPF: Don’t delay GMP reconciliation

This is the final date by which schemes that are contracted-out can register for the Scheme Reconciliation Service, which was set up by HM Revenue & Customs to assist in reconciling membership and guaranteed minimum pension data for members against the records held by HMRC.

As the SRS is not a compulsory service, there is a risk to members that schemes coming to the Pension Protection Fund in future will not have accurate contracted-out records if they do not take action now to reconcile their GMP data.

We rely on the administrators and trustees of schemes we protect to make sure their records are accurate and up to date, so that the right members are paid the right amount should a scheme ever transfer to us.

Why is engagement with the GMP reconciliation process important?

From April 5, HMRC will no longer track contracted-out membership or GMP amounts. The implications of this where a scheme is not registered could be that liabilities are increased unnecessarily. 

The reconciliation process is used to ensure that scheme and HMRC records match. Where they do not, HMRC will require sufficient evidence to change records.

By not registering for this service the opportunity to reconcile records will be lost, and all HMRC records will need to be adopted, which may mean additional members or increased individual entitlements.

What happens when schemes register with SRS?

Once registered, a scheme will have the opportunity to compare its records against those held by HMRC. This will allow the scheme to challenge where it does not agree with the records held by HMRC and, through the evidence provided, ensure that only the correct liabilities are reconciled to their scheme. 

In a practical sense this would comprise of HMRC providing records of the scheme membership and contracted-out history by each individual, so that the scheme can reconcile where individuals and amounts agree.

Where agreement is not reached, the trustees will either need to show HMRC sufficient evidence to change its records or adopt the HMRC records.

The PPF has guidance for this process in an assessment period and is happy to pick this up with the appropriate schemes if they enter an assessment period before December 2018.

Ensuring pension scheme administrators and trustees maintain proper scheme records is taken very seriously at the PPF. We therefore strongly encourage schemes to register for the SRS before April 5 2016, if they have not already done so.

There is clearly a significant amount of work involved in the reconciliation process. To help schemes get this right, we will be talking with the industry to ensure steps are taken to mitigate the risks, making certain best practice is applied and that we continue to protect scheme members going forward.

Chris Parrish is technical, quality assurance and training manager at the Pension Protection Fund