Trustee boards are not focusing enough on data issues despite the bad effect poor data can have on members, according to a PMI roundtable in May. Holly Roach reports
Making sure pension scheme data is accurate has never been more important but it is still not being made a priority.
This was apparent at the Pensions Management Institute (PMI) roundtable ‘Getting ready for the end game: Where next for data?', which took place on 16 May. The discussion was largely focused on the issues surrounding data in the pensions industry and the lack of concentration on it, despite the effects that poor data can have on members' retirement savings.
The Pensions Regulator (TPR) executive director for regulatory policy, analysis and advice David Fairs stated that in some schemes, data is "very poor", and he has seen significant amounts of it "get lost in transfers". Providers must take more care and should data get lost in transfers, they must ensure it is recovered without opening up personal information to cyber security risks, which are rife in the industry.
Despite the efforts of the watchdog to improve data quality and output, Fairs revealed that "as a regulator, we don't focus on [data] as much as we should".
Arc Pensions Law partner Jane Kola argued that some schemes have "bigger problems than others", in terms of data and the consolidation and cleaning of it. She added that while "data is one side of the coin, rules are the other", stating we must not forget the law is a key issue when dealing with individuals' data, especially since the introduction of the General Data Protection Regulations (GDPR) in May last year.
Kola also noted there are times when missing data is not possible to recover and sometimes there is "no choice but to make assumptions if there is missing data", adding that making these kinds of assumptions "leads to risks".
She added: "All schemes have an issue somewhere" but noted they don't necessarily know how to fix them due to the fact they "don't know where" the issues are. She noted that the answers to data issues are all there, if a person knows where to look.
ITM head of client management Akash Rooprai, who also took part in the roundtable, stated: "There are not enough discussions of data issues on trustee boards", resulting in some data potentially never being recovered due to there being no search for it. He noted data is not a high enough priority on trustees' agendas.
Data needs to go through a full cleanse, as Scottish Widows head of bulk annuities Emma Watkins said. Schemes must ensure data is clean enough "to be confident it won't fundamentally affect pricing". However, she noted that in her experience, "trustees are not prepared to incur the costs of cleaning data", and so it is often not done.
Yet, Rooprai argued the "cost benefit of cleaning data is a no-brainer" due to the long-term benefits to the scheme once it is completed.
The participants also discussed one of the biggest tasks for DB schemes: guaranteed minimum pension (GMP) equalisation. The data required to equalise pensions between men and women must be found and organised to ensure benefits are correctly amended.
Kola suggested schemes need to get started with the process of equalisation and noted once the data is found and the equalisation process is complete, "there is not much left to sort out after". Agreeing with Rooprai, she suggested getting the process done now, and doing a full data cleanse, will help schemes with numerous other issues in the future.
"We've kicked the GMP can down the road for 28 years, let's not kick the can any further," she added.
People are entitled to the correct benefits in retirement and are entitled to what they were promised, as Kola stated, and the process needs to get started to ensure members are paid what they are owed. She added the industry should make the best of the equalisation process, not the worst.
At Professional Pensions' spring defined contribution conference on 24 April, TPR regulatory policy directorate policy manager Louise Sivyer noted that only a "small number" of schemes had actually measured their data over the past year, with some of those "reporting low scores".
Fairs also revealed TPR's plan to "take action against schemes who fail to provide data to the pensions dashboard" when it is launched. This comes amid warnings from the watchdog in April that it plans to reduce the number of ‘poorly run' schemes in the industry.
Fairs added that to ensure data issues are fixed, as an industry we must "make it less comfortable to sit on bad data", so that it will eventually be improved.
This comes after TPR chief executive Charles Counsell said in May that over 1,000 schemes will begin to feel the ‘gentle hand' of enhanced supervision from the regulator as it aims to boost its regulatory grip.
The regulator also set priorities for its joint action with the Financial Conduct Authority in April this year, to review whether pension schemes are providing sound information to their members.
While Kola said that trustees need to be "realistic" about the process of cleaning data, Fairs said he is "hopeful" that schemes will address the data challenges prevalent in the industry.
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