Financial ServicesProviders Company Schemes Public Sector Third Party Administrators

On a mission from GAD

Colin Lewis

Managing Director

reports on a recent series of data roadshows.

27 July 2018

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:

  • Good data is essential for good outcomes.
  • Regular data reviews and data improvement plans are essential.
  • Good data governance needs to be exercised by the Local Pensions Fund and Pension Boards.
  • There is a need to engage and educate the participating employers of their obligations.
  • The 'honeymoon period' with The Pensions Regulator (TPR) has come to an end and it is more likely to bare its teeth and fine funds and/or employers in the next 12-18 months.

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:

  • Hundreds of employees seemed to be earning over £300,000 per year.
  • The CARE pay data was not consistent.
  • There were thousands of unprocessed leavers.
  • There was missing and incomplete data.

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:

  • 8% completion errors - missing data, for example, a pensioner with no date of leaving
  • 4% tolerance errors - data outside of a pre-defined tolerance, those employees earning £300,000 per annum
  • 2% consistency errors - data held being inconsistent with other data, for example, an active member with preserved benefits

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:

  • Automating exchange data with employers
  • Ensuring better member service through earlier identification of missing data
  • Improving overall data quality and record-keeping
  • Making it easier for employers to meet their statutory obligations
  • Streamlining the financial reconciliation process
  • Increasing the number of automated tasks performed each month

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.

Colin Lewis is Managing Director at i-Connect, a subsidiary of Aquila Heywood, the largest supplier of life and pensions administration software solutions in the UK.

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