Over the past few months, I've been touring up and down the country presenting at a recent series of data roadshows. Tailored to Local Government Pension Scheme (LGPS) administrators and held by the Ministry of Housing and Communities and Local Government (MHCLG) and Government Actuary Department (GAD), roadshows took place in London, Cardiff, Wolverhampton, Manchester and Durham.
MHCLG is the scheme legislator of the LGPS and GAD is the LGPS actuary. Each roadshow was well-attended, with approximately 12 fund representatives at each roadshow.
The message at all five workshops was the same:
As part of these roadshows, GAD gave its experience of the data quality it received in the 2014 and the 2016 valuations. For me, the big takeaways from the workshops were GAD's concerns about the quality of data received in that:
All of this inaccurate or incomplete information could result in the wrong conclusions being reached and increasing the LGPS liabilities. GAD also highlighted that it needed accurate data to assess the Cost Cap mechanism that guarantees the upper limit of employers' contributions paid into the scheme. If this ceiling is breached, it can trigger an increase in the employees' contribution rate or a reduction in their benefits from the LGPS.
In addition to representatives from GAD, the four consulting actuaries who perform the individual fund triennial valuations were also represented. Some of the highlights (or lowlights) of their experience of the 2016 valuation data were:
The actuarial companies also shared the experience of a fund that recently went through a data cleansing exercise. The effect of improving its data quality resulted in a 2%-5% decrease of the fund's liabilities. For the LGPS valued at £300 billion, that is a pretty impressive £15 billion.
My session at the roadshow focused on what was possible with software and employer portals. The particular focus was on automating the monthly data exchanges between employers and pension funds, using technology to achieve efficiencies.
The view of all presenters was that monthly data returns would become the norm in the next few years. Monthly data collection will enable employers to provide the scheme with timely, accurate and complete data and provide both process and operational efficiencies by:
My final thought from the workshops was that there is a data premium. This premium is about getting things right first time, more automation, reduced costs/liabilities, a reduction in the number of appeal cases and driving schemes' abilities to exploit opportunities around improvements in technology and automation.
Remember - better data equates to better decisions and better outcomes for both scheme members and scheme employers.