Communicating GMP calculations to members is no easy task. Matthew Doggett looks at how TPT Retirement Solutions has addressed the challenge
Communication is the key to success for any project your scheme may be undertaking.
Though guaranteed minimum pension (GMP) calculations are, in theory, quite straightforward, in practice the process is fiendishly complex and is likely to give the steeliest of pension teams some sleepless nights.
Easier said than done
That's because it isn't just about complying and ticking the box. For instance, if a member's GMP is set at £200 per annum and HMRC says it should be £150, you can't simply replace one number with another. You must unpick it year by year, undoing increases of both GMP and non-GMP benefits back to the start. Once that's done, you can then roll it forward in order to make the calculation.
As a result, some of our members would have been underpaid GMPs while others had been overpaid. There was also a small minority whose various years of deficit and surplus of GMP accrual would mean it was netted off and they would receive no payment at all.
Even though it has all 'come out in the wash', it must all be explained to members. However, we all know this is no easy task with more straightforward concepts, but GMPs is a very complex subject to explain to the uninitiated. And even if the net result is that you are making their situation better, they're still not likely to understand why they are better off.
Preparation is everything
So, this project was going to require some careful planning, but because we had started the process early, we had the luxury being able to delay implementation of GMP reconciliation by several months in order to work out our approach to members.
Of course, both the scheme and the trustee wanted the process to be fair and equitable. So we went back to basics on communications and didn't simply leave it up to the administration team to deal with.
We engaged with different functions across the business - including IT, Marketing and HR - to help us review the communications. We also used our third-party customer service partner, which surveys our members, to be sure that our message would be understood.
In the end, 1,300 members had received under and over payments, split roughly 50/50 and we made the assumption that all of them once contacted would have a reason to be unhappy at the outcome. After all, even those who had received underpayments would receive a lump sum and an increase could find this affected their benefits and/or their tax status.
Those who had been overpaid would receive a reduction in the future. However, we didn't feel it was fair that the overpayment be recovered, as no member could be expected to understand either how GMP works, or that they had received too much.
Go tell it on the mountain
This all needed to be communicated to members and so we wrote to them all six to seven weeks before their payments were due. This would give us time to deal with queries and complaints and direct them towards guidance from The Pensions Advisory Service (TPAS) or Citizens Advice where necessary.
We also created a special team to handle any queries, who could be contacted via a dedicated email address or telephone hotline. Before the launch, we drew up frequently asked questions to ensure we had a consistent message that members could understand.
This wasn't simply about bad publicity for the scheme or our sponsoring employers - it was much broader and more important than that. We wanted to prevent a negative backwash that could taint pensions in general and with current and put future members off.
As ye sow, so shall ye reap
In the end, we received very few calls from those who had received an overpayment - perhaps fewer than 50. Of those, about half thanked us for letting them know about the change and explaining it so clearly. And it should be remembered that some of these changes were really quite significant.
It was a great success and by the time we were ready for rectification, reconciliation was very nearly complete.
The cost of the project was also considerably less than we had feared based upon what we had seen and heard from others. Building that dedicated team meant we were not only well prepared, but properly resourced.
Even one-size-fits-all needs a little wriggle room
By doing the hard yards before the members were even contacted, we weren't caught off guard, and so didn't have to throw money at a problem to make it go away quickly.
It was, essentially, a success because we started with the member and placed their experience at the heart of everything that we did afterwards.
Pensions admin is a process-driven monster, but we must not lose sight that it must always be all about the members.
Members cannot fit within neat processes, yet by placing their needs at the heart of every project you undertake, will give you sufficient flexibility to achieve your objectives - and fulfil members' requirements - in the most timely and cost efficient manner.
Matthew Doggett is executive administration manager at TPT Retirement Solutions
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