Trustees Guidance: Data Audit
Introduction
One of the key objectives of the Pension Protection Fund is to pay the right people, the right amount at the right time so it is vital that, as far as possible, the data we receive from scheme on transfer is both accurate and complete. We expect that all issues relating to individuals will be resolved prior to the actuarial valuation and that accurate information will be transferred to the Pension Protection Fund live administration system. We would expect trustees, in consultation with their caseworker, to identify the key data related risks for their scheme, conduct a cost benefit analysis and agree with the caseworker the appropriate actions and any associated costs in line with guidance below. This breaks down into two areas: checking that the information held about individuals is accurate and complete and ensuring the scheme rules have been appropriately applied. We appreciate that many trustees will be working with administrators to complete this work. If there are any potential issues around this trustees should raise this with their caseworker. As with all other stages of the assessment period the Pension Protection Fund will take a pragmatic and proportionate approach to this important area
Objectives
To ensure that accurate and complete data can be provided to the Pension Protection Fund on transfer so that the right people get paid the right amount now and in the future.
To resolve any outstanding issues before the section 143 Actuarial Valuation is undertaken, even though some issues may not be material to the valuation, in order to ensure an accurate valuation and minimise the volume of reviews and queries raised after this point.
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Key Activities for Trustees
Identify and agree with the caseworker the key data risks and actions to be taken to complete the data audit. This should include a cost/benefit analysis to ensure that action is proportionate.
Ensure that all data fields as specified in the Data Interface Layout are populated and available for uploading to the Pension Protection Fund administration system. Guidance for completing the Data Interface Layout is set out in the PPF Standard Data Interface for Trustees version v4 .Please note we are no longer able to accept submissions that use version 2.3.
Check the data held - Membership Tracing and Existence Checks:
- Check data held is complete and free from common problems listed below :
- Data is not there - field is blank
- Data is in the field but format is incorrect
- Data is there in correct format but is default (eg date of birth is 01/01/01)
- Data is there and in correct format and not a default but inconsistent with rest of data (eg date of birth and date joined scheme do not appear to be consistent)
- Ensure all members are traced - consider the following tracing activities unless alternatives can be justified as more appropriate:
- DWP letter forwarding service
- Section 27 notices of the Trustees Act 1925 (in appropriate newspapers)
- Tracing agencies on a no trace no fee basis
- Internet eg 192.com
The Pension Protection Fund would expect the tracing activities to be conducted in this order unless agreed with the caseworker.
- Report on the scheme’s current policy on existence checks and verification of data fields and consider whether additional checks may be necessary
Reconcile Guaranteed Minimum Pensions (GMPs)
The approach and tolerances around the reconciliation of GMPs should be agreed with the caseworker.
The most important element of this work is to ensure that the number of scheme members in the scheme records matches the data held by NISPI.
Check the application of scheme rules and Pension Protection Fund rules
- Provide audit trail and sign-off on the application of Pension Protection Fund rules as set out in the section Financial Management
- We would expect trustees to start with an internal database analysis and if the following criteria have been met we would anticipate that further actions on the application of scheme would not be necessary unless trustees have any other concerns:
- Appropriate checks have been built in to the administration process
- The calculations have been computerised and automated –
- Administrators have a proforma so they do not need to interpret scheme rules
- The administration of benefits has been audited and assurance been given about the appropriate application of scheme rules
- If there are outstanding issues a sample check of the calculation of benefits should be conducted - a template calculation grid is attached but this, in consultation with your caseworker, should be tailored to meet the needs of your scheme.
- Where necessary a detailed independent benefit audit should be conducted
In checking the application of scheme rules - should overpayments or underpayments be discovered the trustees should liaise with their Pension Protection Fund caseworker.
Consider ill-health reviews
As part of looking at the application of scheme rules, trustees will need to look at ill-health awards. In addition to this the trustees will need to provide the Pension Protection Fund with the information as specified in schedule 2 of the Provision of Information Regulations. The Pension Protection Fund will consider the information provided by trustees and any concerns raised by those associated with the scheme.
Sections 140 and 141 of the Pensions Act 2004 enable the Pension Protection Fund to review any ill-health award which was granted in the three years prior to the assessment date. These sections were included as part of the suite of moral hazard provisions to order to help prevent financial advantage being gained unfairly by certain members at levy payers’ expense.
Broadly speaking, following such a review, the Pension Protection Fund can determine to change the level of compensation from 100% (the level for pensioners over normal pension age, survivors and ill-health pensioners) to the level for those under normal pension age. In practical terms this will mean that compensation will be subject to cap and the 90% and not be paid until normal pension age so payments will cease. However, the member may choose to apply for early retirement which would be calculated in the normal way, (that is an actuarially reduced amount subject to the cap and the 90%). This change would be effective once the scheme transfers into the Pension Protection Fund. Such a change would be made if the Pension Protection Fund considers that:
- an award was made in ignorance of, or was based upon a mistake as to, a material fact relevant to the decision;
- that, at the time the decision was made, the member knew or could reasonably have been expected to know about the fact;
- had the trustees known about or not been mistaken about the fact they could not reasonably have made the award and
- the rules governing ill health award were not satisfied at any time before the assessment date.
Where there is any cause for concern then the caseworker will discuss this further with the trustees and trustees may be asked to investigate. If concerns remain the caseworker may instigate a formal review of the member’s award.
The Pension Protection Fund does accept that the vast majority of ill health awards will have been made in accordance with the correct procedures. We recognise that reviewing an ill health award is a very sensitive matter with potentially serious implications for the member involved and we will do our utmost to ensure these cases are handled with sensitivity and care - however few and far between.
Write to all members
Write to all members setting out a breakdown of the data held (as included in personal details section of the Data Interface Layout ) and, in the event of the Pension Protection Fund assuming responsibility for the scheme, what they will receive either following transfer or at normal pension age. The aim of this exercise is to ask the scheme members to check the accuracy of the data held. Enough time should be built in to the timescales to enable any queries this creates to be resolved before the actuarial valuation is conducted.
Provide the Pension Protection Fund with a full audit trail of the activities undertaken
A template action log is attached.
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Key Activities for the Pension Protection Fund
Provide support and guidance throughout this period and agree how this work will be progressed in relation to the specific scheme in assessment.
The Pension Protection Fund will need to sign-off that the actions taken by the trustees and their administrators and the audit trail provided gives the necessary assurance that the data audit is complete.
The Pension Protection Fund is committed to a pragmatic and proportional approach to data audit and your caseworker will be happy to address any queries you may have.
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