UK - Trustees need to "think like a thief" to protect members from fraud by scheme administrators, delegates at a recent conference heard.
Watson Wyatt head of pensions administration consulting Allan Course said those responsible for running the scheme should seek independent advice on whether their administrators are doing a suitable job.
And he said that failure to do so could result in incidences of fraud and “disasters” that could force scheme closures.
“Trustees can’t take it for granted that everything is going well and administration is competent. All schemes are subject to risks and can easily encounter problems, so they should not assume everything is going perfectly.”
Cross said trustees and scheme managers should investigate what controls and processes they had in place to minimise the risk of fraud.
“They must literally think like a thief and work out how they could rip the scheme off.”
Their administrator’s disaster contingency plan – for incidences such as scheme records being destroyed by fire – must also be reviewed every three-to-five years, or immediately upon any change to the scheme.
Trustees should also benchmark the costs of administering the scheme by “shopping around” to ensure they are not paying too much and that the administrators are doing their job.
Cross said trustees should also check:
- Benefits are being accurately calculated and paid out in accordance with scheme rules.
- Aspects of scheme operation are complying with legislation.
- Contributions in DC schemes are being accurately and promptly invested and allocated to members’ individual accounts.
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