The Pensions Regulator (‘TPR’) has been highlighting the issue of data quality for years and continues to do so. Maintaining data quality requires scrutinising (testing for accuracy, completeness, reliability and consistency) the data set periodically and rectifying where needed. Various rectification tasks may include updating, standardising or de-duplication. Since TPR started pushing their data quality agenda there has been a reasonably positive response from pension scheme trustees, however, over the same period of time, the legislative environment across the UK pensions sector has experienced a rapid succession of changes. Whilst many pension scheme trustees have reviewed their schemes’ data quality and perhaps even taken steps to rectify the issues that exist, legislative developments are potentially creating a host of additional problems for pension scheme data and pension scheme administration operations. The only way to effectively manage this is through the use of dedicated systems.
A good example is the processes involved with pension flexibilities available to members with Defined Contribution (‘DC’) benefits introduced back in 2015. Various actions such as partial Defined Benefit (‘DB’) to DC transfers and flexible drawdowns may not be properly recorded on systems. The issue here is that the fields and calculations required for any potential new inputs may not currently exist and the necessary system development could be difficult or out-of-scope, the implications of this could be disastrous. If all this data is not properly recorded at the time of processing, it could be lost completely or issued with unchecked errors that could create problems for trustees and members alike. Inaccurate records will impact on the information provided to the member and consequently their understanding and application of the guidance and information available. In turn this may lead to the member choosing a retirement option that is not right for their circumstances and which could affect them and their dependents for the rest of their life.
The alternative to updating existing systems is to develop new systems; however the development cycle for a new pension scheme administration system is typically measured in years, with complex projects and high associated costs. Many insurers have been slow to offer new products and services to their customer following the advent of the pension’s freedom flexibilities. One of the reasons cited by insurers to justify the lack of greater flexibilities is that they have not received adequate support in order to develop systems that can deliver the proper information and protection that consumers should expect in making choices about their retirement options.
Beyond the software development world, users of third party systems are often faced with large scale implementation and data migration projects should they wish to upgrade or change their systems. As a result of this, there is a desire among system providers and system users alike to ensure that their pension scheme administration systems remain relevant and fit for purpose for as long as possible. The choice between switching to a newly developed system, or sticking with an existing system and pushing for functionality updates is fraught with risks on both sides. Making the wrong choice in the short term could have costly repercussions for both the long term operations of the scheme and the delivery of a quality service to scheme members, especially if more legislative changes occur in the future.
As always, the key is vigilance to ensure that the correct systems and processes are in place to guarantee good record-keeping now and in the future.