Pensions Benefit Audit Service
Trustees need to be sure that the right benefits are being paid to the right member at the right time.
In conjunction with our Pensions Data Audit Service we recommend that a Pensions Benefit Audit is conducted to ensure that members' benefits are being and have been consistently provided in accordance with the scheme's legal governing documentation.
Our Pensions Benefit Audit includes:
- A comprehensive review of all scheme documentation, current and historical.
- An analysis of current custom and practice adopted by the scheme's administrator and actuary.
- The preparation of a "chronology map" detailing material changes to the benefits provided over the lifetime of the scheme (including those resulting from legislative change)
- The subsequent preparation of detailed benefit specifications against which automated calculation routines are prepared and run against the scheme's data.
- A Report that highlights actual or potential errors in benefit calculations, the nature of the errors and whether there is evidence of systematic problems. It would analyse the potential financial impact, both on the member and for the scheme as a whole.
Experience shows that systematic errors in the calculation of benefits are surprisingly common and, quite often, hard to pick up. Far too often, custom and practice prevails over a thorough understanding of the governing documentation and, when challenged, "because it's always been done that way" is a typical response.
Real examples we have encountered include:
- Incorrect application of scheme pension increase rule.
- Use of incorrect early and late retirement factors, the administrator using 'house' factors rather than those actually hard coded in the scheme rules.
- Incorrect calculation of final pensionable salary.
Such errors - and others like them - will result in not only members receiving the wrong benefits, but also the incorrect valuation of a scheme's liabilities and, consequently, the company's funding obligations and IAS19 and FRS17 computations.
The obligation on trustees to vouch for the accuracy of their data takes on more significance when schemes enter the endgame whether this be wind up, Pensions Protection Fund (PPF) or Financial Assistance Scheme (FAS) transition, Buy-Out, or Enhanced Transfer Exercise. In any of these situations, a benefit and data audit is an essential prerequisite.
For information on our Pensions Data Service contact Mark Johnson or David Davison on 0141 331 1004.
Next, why not take a look at our Data Audit Service
