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Record-keeping: measuring member data

The Pensions Regulator has just issued its 'Record-keeping: measuring member data' consultation report.

Its recommendations are that whilst some schemes are improving, there is still a long way to go to bring scheme common data up to the standards required of the law.

As they rightly say, 'Member record-keeping is vital to almost everything else that happens in a pension arrangement. We consider that an understanding of the risks of poor record-keeping, supported by measurement, is a vital part of good governance.' Not only is member record- keeping good governance, it massively reduces the cost of administration, enables accurate calculation of scheme liabilities and assists in preventing fraud.

Good record-keeping is relevant for all pensions schemes. 'For trust-based schemes, the 'duty to account' is a fundamental obligation owed by any trustee to their beneficiaries. The 'duty to account' requires trustees to keep adequate records about their management of the trust, and to provide these records to their beneficiary. Trustees also have a duty to inform beneficiaries of their interests. There is case law stating that a trustee who fails to keep proper records 'exposes themselves to grave risks.' Contract-based schemes need to keep sufficient records to enable them to discharge their contractual obligations. The precise nature of these obligations will vary, but a pension scheme which failed to keep basic records would likely place itself in a position where it could not perform its contractual obligations to its members. A failure to keep adequate basic records could also be characterised as a failure to maintain adequate internal controls".

The regulator can if necessary enforce a wide variety of record-keeping obligations. Most record-keeping breaches constitute breaches of pensions legislation and can be enforced through issuing Improvement Notices and Third Party Notices. Civil Penalties are also often available.

For common data, the standards achievable should be as follows:

• For new data created from 2010 onwards, controls and systems should be in place to capture and record all data accurately, and this should be evidenced by, for example, a score of 100% in the data tests;
• For legacy data, schemes should test for data quality, using our guidance as a minimum level of reassurance, (a score of 95%) and, if necessary, put plans in place to improve the quality of data by the end of 2012.

We can help you to achieve these targets by providing data cleansing solutions, appending missing data and an analysis of your schemes' common data for just a few pence per member.

For more information, please call us on 0207 8639 3233 or email Penny.Maystone@capitatracing.com

11 February 2010

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