Danielle Higgins is managing director of The Tracing Group
Accurate data is the foundation of any pension scheme, especially when buy-ins and buyouts are under consideration. Where a company decides to divest itself of its pension liabilities by transferring them to an insurer, while strategically beneficial, this can be fraught with risks if the scheme data quality is compromised.
Pension schemes thrive on precision therefore the repercussions of inaccurate data, for instance where it contains inconsistencies or gaps, will cause the insurer to become wary. This is because inadequate data tends to elevate transaction costs, introduce delays, and lead to uncertainty. This damages the trust between the pension scheme and the insurer.
If we consider the question, "is impeccable data crucial for my pension scheme?" the answer is a resounding "yes". It forms the foundation for all pension-related calculations and valuations. Without it, the entire system can quickly breakdown.
From the insurer's perspective, your data isn't just a string of numbers - it's the key to their risk assessment. They depend on your data to evaluate your scheme's liabilities. Assumptions are formulated based on this data, which subsequently drive the premiums and pricing structures and ultimately will determine the value of your scheme to them.
Finally, the often overlooked feature of guaranteed minimum pensions (GMPs) is a vital aspect to consider. If your scheme hasn't addressed this yet, it's imperative to equalise the GMPs during the buyout or buy-in process.
In summary, a smooth, efficient pension plan buy-in or buyout will achieve maximum value if it can demonstrate accurate, consistent data.
Cost savings
Recognising the challenges and complexities involved, The Tracing Group specialise in data quality improvement. We are active in addressing discrepancies, ensuring that data stands up to the rigorous scrutiny of insurers for the schemes we work with. Our process of scrutinising data with meticulous precision, leaving no stone unturned, is not only the key to ensuring the process runs smoothly, but also provides significant financial liability savings. We are proud to have achieved liability savings of between £30-£40m for a pension scheme with just under 10,000 deferred members recently.
These savings are made when certainty is established on every member record. When members that have died - in particular those that have died abroad and so are very difficult to identify - are found before the buyout or buy-in process, the scheme is then able to present the insurer with hard facts about its membership and data quality.
Conducting such work can help you to maximise the value of your scheme for buyout or buy-in, through delivering substantial liability savings by ensuring your data is accurate, proven and verified.
Danielle Higgins is managing director of The Tracing Group
