Q&A: The key administration challenges facing schemes

Andy Greig
Partner
Barnett Waddingham

Andy Greig is a partner at Barnett Waddingham and focuses on pension administration, new scheme implementations and pooled banking services. He joined the firm in 2000 and became partner in 2016.

What are the key administration challenges facing pension schemes at the current time and how are these challenges being addressed?

Andy Greig: Pension scheme data continues to be an issue for trustees; while we have seen an attempt from The Pensions Regulator (TPR) to ensure scheme data is reviewed, the real issue is the quality of the data held, not just the gaps. With more schemes entering the PPF and heading to buyout, data quality is essential. GMP reconciliation exercises have enabled administrators to focus on the accuracy of contracting-out data but the issue is wider. It has, however, given scheme administrators another opportunity to get scheme data on the agenda at trustees' meetings.

Another area of concern is around pension transfers. While there has been a lot of focus around pension liberation, the administration of overseas transfers is a challenge, with penalties and sanction charges a real possibility. Prior to July 2015, scheme administrators relied on the published list of Qualifying Recognised Overseas Pension Schemes (QROPS), which discharged any liability of the scheme administrator. When HMRC re-published their overseas pension scheme list in July 2015, the same level of assurance did not apply, leaving administrators and pension schemes in a difficult position. As administrators, it's important to go through the necessary due diligence should it transpire that the receiving arrangement does not meet the qualifying criteria.

What are the most common challenges you see with regards to schemes preparing for GMP equalisation and how can these be resolved?

Andy Greig: There are two main challenges for schemes looking to carry out GMP equalisation: having accurate data and choosing an appropriate method. The first of these is relatively straightforward to solve. Cleansing data and reconciling GMPs with HMRC is a tried and tested process for good quality administrators.

The real challenge is selecting an acceptable method to equalise GMP and finding someone competent to implement it. Whilst for schemes in a PPF assessment period there is a prescribed methodology for equalising GMP, the situation for ongoing schemes is a dazzling array of grey. The safest approach would be to follow the DWP's suggested methodology published in 2012 but it is rather on the generous side. Should the PPF's methodology be adopted? Well it could be, but some serious customisation would be needed to make it appropriate for non-PPF benefits. Alternatively a bespoke method for each scheme could be used, set in line with the relatively simple principles of GMP equalisation - it's just the detail of implementing the methodology that's complicated.

Are pension schemes doing enough to ensure their data is secure? What are the key areas that schemes and trustees need to be focus on at the current time?

Andy Greig: This is a continuous challenge for administrators and they are all aware of the need to keep data secure (or at least, they should be!). As an example, we arrange six-monthly Penetration Tests to be carried out by an external intermediary on all network entry points to ensure our systems remain safe and are not subject to security vulnerabilities.

Online access to pension scheme data for members and trustees is a growing expectation and a key area to focus on right now. Security is paramount. Having a robust system with a secure login process is number one priority for the trustees. Users now want to access their data on handheld devices, not just on their work desktop PC, which means having quick and easy access while maintaining strong security.

How can scheme administrators and TPAs help win the war against pension scammers?

Andy Greig: My initial reaction is to wonder why it is our responsibility at all. Why does the legal system not prevent scammers from operating, and why do the regulatory bodies and police not enforce it more rigorously, effectively and quickly? Given where we are, though, robust detection systems, stronger and more direct engagement with members (by phone, for example) to alert them to the danger they are in, and a willingness to look beyond the legal technicalities 'for the greater good' when necessary, will help lay the foundations. We then need much more support from the likes of TPR, HMRC and the Ombudsman, as well as the legal community, to enable us to stand firm.

Can you detail some of the key projects and/or innovations you are working on currently to help clients with their administration challenges?

Andy Greig: We are focusing on our staff, identifying specific training needs expanding on our established training program to meet these needs. The complex nature of pensions means that it is vital our administrators have the knowledge and tools to provide the client with a first class service.

We are also developing an automated streamlined approach to help our clients with any GMP rectification work that arises out of the GMP reconciliation process. This will reduce the processing timescales as well as keep costs to a manageable level.