Governance Spotlight: all I want for Christmas is accuracy


Introduction

TPR's deadline of 31 December 2012 for complying with its targets for standards of data in pension schemes is fast approaching. Our recent Pensions Managers' Forum proved that many schemes are keen to hear what they need to be able to demonstrate. In our ongoing series of newsletters from our Governance Team, we remind trustees of the requirements and offer some practical tips so that trustees are ready in 2013 to engage with TPR.

In this Alert:


Reminder: the basics

  • Accurate record-keeping is a key pillar of the legal requirement for trustees to maintain adequate internal controls. Ultimate responsibility rests with the scheme's trustees, even where day-to-day administration is outsourced to TPAs.
  • Common data uniquely identifies a member.1 TPR's guidance is prescriptive about both the fields comprising common data and its targets. It expects trustees to ensure that by the end of 2012 their common data is:
  • 100% accurate for new data created after June 2010; and
  • 95% accurate for legacy data created before June 2010.
  • Conditional data is scheme-specific. It is the additional data you need to be able to ensure the right benefits are paid to the right members, at the right time. Trustees, working with their administrators, need to set their own conditional data targets.


Getting under the skin of the requirements

  • Simply identifying that data exists is not enough. Testing needs to assess whether data is accurate.
  • Follow-up on obvious inaccuracies – if post is returned undelivered or if an address is incomplete on a record, steps should be taken to correct the inaccuracy.
  • Pre-June 2010 data will be "new data" if the record has been amended or updated after that date – for example, reflecting a change in a member's status.

Just be sensible

  • Not all data is capable of being perfect at all times. So trustees need to be pragmatic about what steps are reasonable to take. TPR's guidance refers to compliance steps being "proportionate".
  • There are plenty of tools available to correct inaccurate data: tracing exercises, existence checks, or even just writing to members directly. Trustees need to work with their scheme administrators to strike the right balance between effectively achieving targets and the inevitability of cost and resource constraints.
  • Focus on outcomes. There may, for instance, be little merit in spending vast sums finessing data for deferred members who are many years from retirement, if time and money might be better spent ensuring the accuracy of data to deliver benefits and choices to those close to retirement age.
  • If you are contemplating changing administrators, the need to correct data inaccuracies is even more acute as TPR expects data problems to be rectified before any handover. Ensure that the terms of engagement and scope of responsibilities for the new administrators are sufficiently watertight.

What do you need to demonstrate to TPR?

  • TPR's current position is that it will not be requiring trustees to submit data scores. Instead, it will be carrying out random checks. So you need to be prepared to demonstrate what steps you are taking to comply with the requirements.
  • You should be making your own assessment about compliance and ensuring that all reasonable steps are being taken to hit the targets.
  • Think about record-keeping from a behavioural perspective, not as a box-ticking exercise. We expect TPR will want to understand the errors identified, and the steps you have taken to correct them, as well as seeing plans for improvement.
  • There may be good reasons why your schemes' records retain some inaccuracies. Put yourself on the front foot and be ready to explain why.
  • In extreme cases, consider contacting TPR before it contacts you. It has asked schemes anticipating significant difficulties with meeting the targets to get in contact so that it can provide appropriate support.

What does the future hold?

  • 2013 will undoubtedly influence the extent to which TPR considers moving from education mode to enforcement. Options for the future include:
  • requiring future scheme returns to include data scores; and
  • using its regulatory powers, such as improvement notices or civil penalties.
  • Trustees need to recognise that data correction is "not just for Christmas" 2012. Inevitably, most schemes will still have room for improvement on work undertaken so far. TPR recommends that a scheme's data score should be re-checked at least annually, with further action being taken if needed.


1For example, their name, date of birth and national insurance number

For more information

Lucy Dunbar

+ 44 (0)20 7615 9569

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