Nearly half (49%) of pension professionals in the UK believe that most defined benefit (DB) schemes will miss the April 2016 deadline for accurate assessments of their members’ Guaranteed Minimum Pension (GMP) rights.
That’s according to new research by EDM Group (EDM), which also shows that only 23% believe most schemes will meet the deadline; 11% believe most schemes will miss it by up to three months, 12% by up to six months and 26% by up to one year or more.
As part of its phasing out of the state second pension, or ‘SERPS’, the Government is passing responsibility to DB schemes to administer ‘contracted out’ rights and ensure scheme members are paid the correct GMPs. This will require schemes to ensure that their own data matches the records held by Her Majesty’s Revenue and Customs (HMRC). The Government is offering a service enabling ‘reconciliation’ of data between HMRC and schemes’ data, but to use this service, schemes must hold accurate assessments of their members’ GMP rights by April 2016.
Around 4,500 pension schemes in the UK are affected by the GMP changes but many of these are expected to struggle to meet the deadline because their information is inconsistent and held on a variety of formats such as paper and microfiche going back several decades.
The research also shows that more than a quarter (27%) of pension professionals believe DB schemes are either ‘largely’ or ‘extremely’ unaware they will have to hold accurate assessments of their members’ GMP rights so they can be reconciled with the National Insurance and PAYE Service systems held by the HMRC. Two in five pension professionals (39%) believe that the UK pensions industry is ‘largely’ or ‘extremely’ unaware of HMRC Scheme membership Reconciliation Service that provides reconciliation for deferred members and pensioners.
Lee Foord, Associate Director for EDM Pensions Data Services, says: “Many trustees may be unsure of what all the changes mean and are putting off decisive action but it is ultimately their responsibility to ensure that the members GMP data is reconciled ahead of the April 2016 deadline. They will either be unaware of, or have underestimated, the labour and cost involved in the administration of this process, especially where the data is contained in physical formats.
“Digitising paper and fiche records presents them in a format that can be more easily utilised in the reconciliation. Relevant documents and items of data can be extracted from a scanned record to speed up the process and reduce the overall cost. The irony is that despite the procrastination and fears, reconciling GMP data can be a much more straightforward and easier task than trustees realise.”
EDM Group provides companies with effective and efficient ways to manage the rapidly growing volumes of information flowing into and through their businesses every day. Clients include HMRC, Grant Thornton, Nationwide Building Society, Legal & General, Avis and Bupa.